Tax Expectations Chances are slim that the government would make any structural changes to the personal or corporate income tax rate regime – though there is pressure from ordinary tax payers to reduce their burden at a time when incomes have been hurt by the pandemic. Yet, given the small proportion of Indians that do pay taxes, this is highly unlikely, especially as it’s a bulwark of revenue collections this year.
As for corporate tax – rates were cut in 2019. No change is expected but on the fringe there is concern that declining corporate tax collections might prompt some review. The global race to the bottom in corporate tax rates is also showing signs of turning. A change in GST rates is already being studied by a group under the aegis of the GST Council.
What Morgan Stanley Analysts Expect From The Budget
| Sector | Reform Expectations From Budget |
|---|---|
| Real Estate | Affordable housing boost, income tax and GST reforms, better fund flows |
| Autos | Any incentives for setting up low emission mobility infrastructure. Any reduction in import duty on fully built EV units. |
| Aviation | Reduction in import duty on aviation turbine fuel and reduction in landing, navigation and parking charges. |
| Financials | Measures to broaden ECLGS eligible sectors and government spends on infra development. Quantum of capital infusion and timeline around issuance of the same. Details of changes in tax structure / rates / deductions, if any |
| Oil and Gas | Incentives on expansion of Gas infrastructure. Incentives on Green Hydrogen Infrastructure. Higher import taxes. |
| Metals & Cement | Details around budgetary allocation for road, metro, railways and housing segments, if any. Details around budgetary allocation for various rural schemes. |
| Consumer | Quantum of the stimulus and whether it is a direct transfer or relief in terms of taxes. Commentary on taxes for tobacco and increase if any. |
| Industrials | Growth in public capex allocation being more than growth in revenue expenditure. Statement of Intent and stronger growth in capital allocation. |
| Internet | Removal of higher surcharge on LTCG on sale of shares of private companies. Tax on ESOP granted by start-ups to be levied only at the time of sale of shares. The benefit of deferment of tax on ESOP available to all DPIIT recognised startups (vs eligible startups defined under Section 80-IAC of IT Act as of now). |
| IT Services | Expand utilisation of SEZ Reserve to include expenses incurred on leasing of computers, using cloud infrastructure, buying software, etc. |
| Pharma | COVID-19 relief packages and health infrastructure investments. |