government is unlikely to offer any major relief on personal income taxes in
the 2016-17 budget due to lack of
fiscal space, senior officials have said.
Discussions on the crucial budget, which will be unveiled in February, are under way and the numbers are being worked on. But a tight fiscal situation may prevent the government from being populist at any level. "The room on the fiscal front is very limited. Therefore, it is unlikely that there will be any major concessions on the personal income tax side," a government official, who did not wish to be identified, told TOI, adding that some relief may be in store for taxpayers.But he did not elaborate.
The government is faced with a very challenging fiscal situation in the current financial year as well as in 2016-17. Several factors have narrowed the fiscal space. The first is the impact from the rollout of the 7th Pay Commission recommendations. In November, the Pay panel had recommended an increase in pay and allowances of 23.6%, a 24% rise in pensions and one-rank-one-pension for central government employees and paramilitary personnel.