Top-5 market expectations on direct and indirect taxes

New Delhi: As Finance Minister Nirmala Sitharaman presents her fourth Union Budget on February 1, 2022, all eyes would be on how the government balances out populist measures while walking the tightrope of fiscal consolidation.

While Indian corporates are expecting some key announcements which will enable them to reset their growth agenda, individual taxpayers are expecting some more disposable income in their hands to invest and consume more. As India works towards a $5 trillion economy by 2025, and with just 2 days to go for 2022-23 Budget, here are the top five market expectations on direct and indirect taxes.

Direct taxes: 1. 80C deduction available up to Rs 1.5 lakh a year be revised upwards significantly; 2. To make the optional concessionary tax regime, which came into effect from April 2021, more acceptable, raise the threshold Rs 15 lakh income for laying peak 30 per cent tax rate; 3.

As Web 3.0 unfolds, crypto assets encompassing a wide array of digital assets like non fungible tokens, wrapped asset token etc, will gain tremendous traction. it is being expected that a specialised regime for taxation of cryptocurrency will be introduced in the budget. 4. The burden of the long-term capital gains tax (LTCG), introduced vide Finance Act 2018, has somewhat dented investor confidence. Major economies do not have LTCG tax.

In India too, it is expected that LTCG on the sale of Indian-listed equity shares will be exempted as it would boost investment through the stock exchange. 5. Corporates are expecting that the entire amount, or an appropriate proportion of expenditure incurred for helping the society and employee welfare during Covid-19 will be allowed as deductible expenditure. Also, the government is expected to reduce the tax rates for companies engaged in R&D activities to 15 per cent or less and allow weighted deduction on in-house R&D expenditure.

Indirect taxes: 1. Rationalisation of Customs duty structure for EV and ancillary components, renewable energy generation devices and related components is likely. 2. Sector specific concessions for semi-conductor manufacturers with focus on exports is expected. 3. Budget allocations for the expansion of the PLI scheme for sectors such as leather and laminates; additional incentive schemes will also lure companies into setting up additional manufacturing in sectors that were not the focus in previous budgets and help reverse the impact of the pandemic. 4. The government is already reviewing 400 customs duty exemptions (as announced in the previous budget). The final list is expected to be proposed as part of the 2022 budget and industry is awaiting it so that there is no adverse impact on trade as a result of this exercise. 5. Extension of customs duty exemption on goods imported for testing, and setting up of a customs dispute resolution forum, ease compliances under customs, and integration of the current ICEGATE, DGFT and SEZ online portal into a common digital platform.