Government should double the basic I-T exemption limit to Rs 5 lakh per year and continue with incentives and deductions to corporate houses for stimulating consumption demand and propel private investment post demonetisation, a EY survey said.
In a pre-budget survey by tax consultant EY, an overwhelming 81.42 per cent of the respondents felt the corporate tax rate would be reduced to 25 per cent, from the present 30 per cent, excluding surcharge and cess.
In view of the push to ‘Make in India’, 72 per cent the survey respondents expected the government to continue with sector specific incentives/deductions.
However, majority of respondents felt that to reduce the corporate tax rate, it is imperative to phase out the tax exemptions to meet the fiscal target.
On whether the government would reduce personal tax rates or revise the threshold limit to put more disposable income in the hands of the common man to increase consumption and demand, the survey found that almost 60 per cent of the respondents want personal income tax rates be enhanced to Rs 5 lakh.
About 36 per cent of the respondents felt that peak personal tax rate would be cut to 25 per cent. Currently, income over Rs 10 lakh attract peak 30 per cent tax rate.
The survey includes the views of more than 200 CFOs and senior tax professionals from sectors including, automotive, consumer products, life sciences, infrastructure, technology, financial services and others.
“Our survey indicates that corporate India believes that reforms are around the corner. There is a clear expectation of certain tax benefits to individual tax payers so consumption expenditure can increase.
“The recent inflow of funds in the banking system and GST are two moves that will allow government an expanded tax base,” EY India Partner and National Tax Leader Sudhir Kapadia said.
The reduction in corporate tax rate is expected only by way of reduction in the base rate while the rate of surcharge is expected to remain the same, the survey found.
Regarding implementation of the General Anti-Avoidance Rules (GAAR), the survey found that the industry is divided in their expectation regarding deferral of GAAR, with a larger share of participants expecting it to be deferred by a year.
While 33.33 per cent of the respondents felt that GAAR would be deferred by a year, 32.79 per cent feel that it will not be deferred.
A significant number of participants are uncertain about the future direction, the survey said.
Asked if government may reconsider phasing out tax exemptions, the survey found that 47.54 per cent respondents found that exemptions would be phased out, but 43.72 per cent felt that exemptions would reconsidered.
“Corporates are equally divided on their expectation of reconsideration on phasing out exemptions,” it noted.