Union Budget 2018: Corporate tax cut a step in right direction

The Budget has sought to address the needs of the agriculture and rural economy by emphasising the need for generating higher income for farmers and announcing measures for doubling farmer’s income by 2022.

Published: February 3, 2018 12:18:04 am
Union Budget 2018 Corporate tax cut a step in right direction Traders watch stocks during Finance Minister Arun Jaitley’s Union Budget 2018 speech on Thursday(Express photo/Partha Paul)

Written by Jayesh Sanghvi & Sumanth Karlapudi

As the last full Budget by the current government, it was expected to focus on sectors which have a resonating impact on the Indian economy and populace as a whole, such as agriculture, health and education. This was going to be a challenge for the Finance Minister as he is also expected to be wary of the evolved beneficial tax environments in UK, US and Singapore, (which taxes business houses at a significantly lower rate) and stick to the roadmap laid down towards reducing the corporate tax rate to 25 per cent.

Meeting the lofty expectations, the Budget has sought to address the needs of the agriculture and rural economy by emphasising the need for generating higher income for farmers and announcing measures for doubling farmer’s income by 2022. The Budget also seeks to address the healthcare needs by announcing the National Health Protection Scheme. Allied announcements towards development of MSMEs and improving employment generation are expected to give the economy a welcome boost.

Adhering to the promise of reducing the corporate tax rate in a phased manner, the Budget proposes to extend the reduced rate of 25 per cent currently available for companies with turnover of less than Rs 50 crore (in FY16), also to companies reporting turnover up to Rs 250 crore in FY17. This is a tangible step for maintaining India as a competitive avenue among the tax jurisdictions of the developed world. A counter point would be that taxpayers are now required to pay health and education cess at 4 per cent on income tax and surcharge (instead of the 3 per cent education cess and secondary education cess).

The highly anticipated standard deduction of Rs 40,000 for salaried employees is a welcome move to address the disparity between businessmen and salaried tax payers. Buoyed by an encouraging wider tax base and a 12.6 per cent increase in direct taxes collections, the Budget clearly seeks to address the needs of the country while staying true to the government’s promise of addressing the maintenance of India’s competitiveness. One may see this as an opportunity missed towards addressing MAT taxation and the economic double taxation of dividends, however, the steps taken show that Centre is steadfast in meeting its earlier promises.

(Sanghvi is partner & national leader, international tax services, EY. Karlapudi is a senior tax professional, EY)

For all the latest Business News, download Indian Express App