Centre can opt for longer route to 3% fiscal deficit target: Survey

Need to support demand till private sector recovers to achieve the fiscal deficit target, says the Deloitte India survey

The government can change its fiscal targets and instead go for a longer route to the 3% target to support demand till the time private sector recovers, a survey of tax and finance executives has revealed.

The survey, conducted by Deloitte India, also opined that a business-friendly tax administration and speedy resolution of tax disputes were critical for the success of Make in India campaign.

"Majority (62%) of the survey respondents believe the government can change its fiscal targets and instead opt for a longer route to the 3% target for the fiscal deficit.”

"The purpose is to have a counter cyclical policy and support demand till the time the private sector is able to recover. An overwhelming, 90% said public sector needs to give a boost to infrastructure spending," said findings of the pre-budget expectations survey by Deloitte India.

As per the survey findings, 30% respondents expected an increase in the basic exemption limit from Rs 2,50,000 to Rs 3,00,000.

Further, similar to that of bringing down the corporate tax rate and phasing out the deductions/exemptions majority were of the view that the individual tax rates should be brought down over time.

The government had last year postponed reduction in fiscal deficit target by a year. The government is targeting a fiscal deficit of 3.9% of GDP in the current fiscal.

Finance Minister Arun Jaitley will present the Budget in Parliament on February 29.

The survey, Deloitte India said was conducted in January with tax and finance executives of over 130 mid to large Indian companies and MNCs based in India.

Almost 79% of the respondents opined a business friendly tax administration and speedy resolution of tax disputes were critical for the success of 'Make in India'.

On phasing out of tax holidays or incentives and reducing the corporate tax rate from 30% to 25%, as many as 58% agreed that complete phase-out of tax incentives is a good measure and will reduce litigation.

The survey further said majority of the respondents have expressed a desire that the scope of Section 80C of the Income-tax Act be pruned to cover investment linked deduction, with an enhanced limit (higher than Rs 150,000).

In addition, the category of specified expenditure under Section 80C (such as tuition fee, repayment of housing loan principle) should be carved out as a separate deduction.

Over 70% of the respondents were also of the view that for ease of doing business, having a transparent system driven by process with minimum discretion is the most important factor.