He was a man who presided over the victory of the free world over the ‘evil’ Communist empire and redeemed America’s position as a superpower that could dominate the rest of the world with a stellar victory in the first Gulf War. How did he lose an election just a year later?
The Narendra Modi-Nirmala Sitharaman combine will do well to remember the hubris of George Bush (Sr). Despite winning the war in Kuwait and establishing the USA as the world’s sole superpower in the early nineties, American voters weren’t too impressed with the senior Bush because of his inept handling of the domestic economy, and particularly his promise of ‘No new taxes’ during the election campaign which he had to break afterward.
There are various optics at play on any given Budget day, from policy tweaks to refocusing funding aimed at growth, infra push and social schemes that will boost the welfare state. But nothing beats the pull of a promise of reworking the personal income tax slabs.
Despite it being just a Vote on Account, the salaried middle-class of India is working itself into a frenzy as budget day approaches — this is it, many have proclaimed on social media, the ostensible reason being that governments love pampering the electorate in an election year with sops.
“The middle class—salaried people may expect an increase in the basic exemption limit, thereby reducing the tax burden on individuals with lower incomes. Accordingly, the subsequent tax slabs may be expected to be revised with new thresholds,” Prateek Bansal, Partner, Taxation, White & Brief, Advocates & Solicitors paints the best case scenario, though he adds that it is “unlikely that any substantial policy changes would be brought in through the interim budget.
NDA 2, with its pro-market and reform-friendly credentials, had not shirked away from bold budgets, be it the massive capital expenditure thrust of the last two years or its offering of an alternative income tax slab. The latter, which offered a higher limit for tax had a catch — no deductions for the likes of home loans or insurance were now applicable.
However, this scheme had not found too many takers, despite Sitharaman sweetening it further by hiking the lower limit from Rs 3 lakh to Rs 5 lakh. However, for most salaried people, this was still unappealing, with many arguing that deductions, at least for home loan, were a requisite.
“Looking at the expectations from the common man, it is possible that the government may take few measures to make the new regime more favourable,” feels Divya Baweja, partner, Deloitte India. “To make the new regime more attractive, the government may consider lowering the highest tax rate from 30 per cent to 25 per cent, increasing the income limit for the highest tax rate from Rs 15 lakh to Rs 20 lakh, and possibly adjusting the standard deduction and basic exemption limit.”
Of course, for a government confident of its return in the next election, whether such a move, which could see forgoing a good chunk of tax revenue, particularly at a time when the fiscal deficit is at an all-time high, is a million dollar question that will be answered only on February 1. No wonder Baweja sounds a word of caution, “The upcoming budget being Vote on Account is likely to keep things steady, with no major changes expected. Whether (these) expectations will be met or not remains to be seen.”
