What to expect from The Union Budget 2022

That time of the year has come when Prime Minister & Finance Minister have started meetings with industry leaders, top entrepreneurs and such, in order to gather their feedback on the state of the economy. Yes, you guessed it right. The Union Budget is around the corner. 

The Union Budget 2022-23 will be presented by Finance Minister Nirmala Sitharaman on February 1. 

Following this, the expectation & suggestion game has already begun. So let’s take a look at what are the industry expectations from the Union Budget. But first, let me take you to the existing situation of the economy. 

A recap of the Indian Economy

Before digging deeper into the discussion, let’s quickly recap significant events in the Indian economy and where it stands right now. 

So that you know, The GDP is projected to bounce back from a downfall of -7.4%  in Q2FY21 to 8.4% in Q2FY22 (World Bank Projection).

Also, the year has seen over 60 public listings, which is more than the past three years combined. Startup listings and the startup sector became a significant eye-catcher and saw a huge surge in funding, along with 42 companies becoming unicorns in 2021. 

The stock market investors saw strong gains in the year with the market making new records one on one. Where Nifty 50 traded at 14,000 levels in January 2021 to trading at 18,000 levels in January 2022, showcasing exponential growth.

Still, the challenges in the economy remained as it is, such as Rising Inflation. So, Inflation has two components: The wholesale price index (WPI) & the Consumer price index (CPI), which recorded new highs of 14.32% & 4.91% in November 2021. Wide gap between the two, isn’t it? The burden of Wholesale prices is more likely to fall on the head of retail customers like us. 

Anyways, another challenge the economy has been facing for a long time is Supply chain disruption, especially in the automobile sector owing to semi-conductor shortage

The NPA issue of the Indian banking sector remains intact. According to an RBI report, the Gross NPA ratio of scheduled commercial banks is likely to increase to 9.5% in September 2022 from 6.9% in 2021. Also, as the economy is severely affected by the COVID-19 crisis, expectations of maximising the revenue and minimising the public expenditure should be the key focus. 

So, all in all, it’s going good with a pinch of drawbacks. So, let’s see a rough estimate of what the Union budget might bring for us this year. 

Expectations from The Union Budget 2022

The union budget 2022 is expected to focus on accelerated growth & equal distribution of resources. Presently, trade & investment are above pre-pandemic levels. But consumption is still falling short. To increase consumption, sectors like auto & housing finance can be targeted. 

According to the IMF, the world economy contracted by 3.2% in 2020. The new budget is also expected to focus on demand generation, job creation, public healthcare, MSME and more. We all know that India is witnessing a startup boom. To encourage this further the ease of doing business (EODB) should be kept smoother.

Moving forward, let's take a look at the key expectations in terms of Taxes, Crypto Industry, Startup Industry and more. 

Taxation

Last year an option was given to taxpayers to select one slab as per their choice; with the majority of taxpayers choosing the old slab, it is clear that the expectations of taxpayers is for a more attractive option of tax slab they can rely upon. Also, for increasing consumption in the economy, housing finance had to be targeted (as we discussed earlier). Thus, the limit of deduction of interest on loans taken for houses should be raised to a minimum of Rs. 3,00,000 to 5,00,000 that is presently of Rs. 2,00,000. 

The relief given to salaried employees in terms of Standard Deduction is Rs. 50,000, which is expected to increase to Rs. 1,00,000. Tax deducted at source or (TDS) is deducted in individual transactions of Rs. 30,000. This limit of Rs. 30,000 should be increased to Rs. 50,000.

Crypto Industry

All the 15 million crypto investors of India might have to wait for a little longer for the bill to pass. Just recently, in the winter session of the parliament, the status of the crypto bill was changed to ‘under consideration’ from ‘ban’. Still, a lot of discussion is needed before they can pass the bill. 

Thus, a crypto bill is unlikely to be presented on the budget day. Reportedly, the government is waiting for the launch of the centrally controlled digital token by the RBI. Also, PM Modi is looking forward to the global discussions on crypto regulations. 

Even though the whole industry wants clarity, especially in terms of taxation, as some exchanges have been accused of evading GST and in return, the exchanges are blaming the lack of a valid tax regime for crypto trade and investment. It is highly expected that the tax regime should come into effect as soon as possible. 

Startup Industry

 It has been a great year for the Indian startup ecosystem, along with the private equity community that has been investors in India for a long time now. Still, there is a lot of headroom for growth. On the flip side, due to the pandemic, the startup space faced challenges too. 

Nevertheless, Modi recently announced that Jan 16 will be celebrated as “National Startup day”. Also, the startup industry has a few recommendations for the government, such as easy access to resources, funds & capital provided by the government to young entrepreneurs. 

Hospitality Industry

This was one of the sectors that was majorly hit by the pandemic. Thus, the sector is seeking lower taxes & incentives. The industry has urged the government to announce more schemes to promote tourism in the budget. 

The Federation of Hotel & Restaurant Association of India has appealed to the Finance Minister to suspend the repayment of loans taken by the Hotel companies to safeguard small hotel owners. 

Healthcare

The healthcare expenditure is expected to grow by 10 to 12%. The budget could see a higher allocation of Rs.18000 Crore in its overall package. 

Also, the fund of Rs. 50,000 Crore made for vaccination is likely to remain intact. Industry experts also expect reforms like incentivising private investment in healthcare infrastructure, expanding health insurance coverage, rationalising GST on healthcare products and more. 

Education Sector

In 2021, the government slashed allocation towards education by 6% but this year it is expected to increase the allocation by 10%. 

Amid the covid crisis, promoting digitalisation has become increasingly important. Thus, to cater it, the government is expected to provide subsidised access to laptops at schools & universities to all the students and faculty members along with reducing interest on education loans. 

The government is also expected to bring the policy to allow access to research funds for high-quality education for students, along with reducing GST on education services from 18% to 5%. Supporting EdTech startups through subsidies is also a must. 

The Bottom Line

The government gives a lot of hints on how a common man should plan his spending. 

Also, every budget has focus areas and a lot of times the government tells us about its plans for 4 to 5 years. Eg. not only this year but in the coming years the government will be spending on Agri or MSME’s. 

In a nutshell, a common man should learn to align themselves with the governments’ vision to gain the maximum benefits.

What's a common man's expectations from the budget :

In India when we invest in stocks, we pay taxes on every level i.e while buying, selling, earning profits, dividends and more. We pay STT, LTCG tax etc. 

So, the way equity markets of India is maturing, for a few years if investors get benefits in this space a lot of growth can be attained. 

So, the top expectations are,

• STT rate should be lowered.

• LTCG tax should be abolished. 

• The taxes paid on the dividend at the individual level should be lowered. 

• 80C exemption limit should be increased from the existing  Rs. 150,000.

• Clarity on tax slab. Clarity such as the old tax slab regime will be effective for 2 to 3 years then taxpayers have to shift to a new tax regime or as such. 

Well, these are all the wishlist and expectations from these sectors individually. We are yet to see what the Prime Minister will bring to the table and how the whole economy will be benefited from the same. So, let’s just hope for the best until 1 Feb 2022.