New Delhi: The Finance Minister P Chidambaram, who was busy with devising new ways to increase revenue collection during the last year, will find it difficult to present popular budget this year. At present, decline in revenue collection is the main cause of worry for the government. On the other hand, the Finance Minister is in under tremendous pressure to announce sops and incentives in the budgetary allocation because this year’s budget will be the last one for the UPA before the 2014 general elections.
It is being conjectured that the Chidambaram may announce income tax relief and focus on indirect taxes to increase the revenue. According to the Finance Ministry officials, the current state of the revenue collection does not provide much scope for the popular budget. It is also important to meet revenue collection target. It will also be a challenge for the government to maintain the current income level in the next budget.
To address the complexity of tax structure, the government needs to bring Direct Tax Code into practice. The DTC is unlikely to be implemented in the near future. Hence, the Finance Minister may incorporate few recommendations of the Standing Committee such as the income tax relaxation. The Parliamentary Committee has recommended increasing the relaxation of income tax upto Rs 3,00,000 per annum. As well, it has been recommended to increase the investment limit for tax exemption.
To increase the tax collection, the Prime Minister Manmohan Singh has suggested imposing extra tax on super rich in the country. But, the government is yet to arrive at the consensus over it. The best example is the deferment of GAAR implementation. Apart from it, there are other provisions in the tax structure which benefit super rich in the country.