Arun Jaitley may hike service tax from 14.5 per cent to 16 per cent

New Delhi: There is speculation that Mr Jaitley may hike service tax from 14.5 per cent to 16 per cent to garner resources at a time when tax collections are expected to fall.

In GST it is proposed that services should be taxed at 18 per cent, so hike in service tax in budget will prepare the economy for higher rates. He may also bring in a new cess for start-up initiative.

As far as salaried class is concerned, Mr Jaitley may increase the tax exemption limit marginally and rejig the tax slabs. He may give tax breaks for people to invest in equity markets.

There is possibility of bringing provisions to tax some of the tax savings instruments on maturity so as to encourage long term savings. Mr Jaitley may also give some tax incentives for people to transact via debit card, credit card or online to bring down domestic stash generation.

The finance minister could bring down corporate tax from 30 per cent in the budget and phase some of the exemptions given to the industry. Budget may address retrospective tax concerns. Speculation of major tax changes have been fuelled by the revenue secretary Hasmukh Adhia tweet that he will be available for any clarification on tax issues in the Budget on Monday afternoon.

FM is also expected to increase funding for irrigation programme so that dependence on rains is reduce and production is increased. As government has increased states’ share in tax collections, FM is not expected to announce any new social scheme.