Income Tax: Budget 2012 for businessmen: What relief can one expect?

A businessman usually expects the budget to create a favorable environment in the marketplace for him to do business. The 'feel good factor' that the budget creates in terms of boosting consumption and the multiplier effect created by planned and non-planned expenditure increases is something he looks forward to. 

Union Budget 2011 had tightened tax norms for businessmen.

Pranab Mukherjee gave the following for them last year.

• To tax life insurance service providers
• Legal representation for businesses under service tax
• Servcie tax on hotel accomodation above Rs 1,500 per day

My expectation from Budget 2012 is an easing in direct taxation slabs which will amount to more surpluses in the hands of professionals and businessmen.

This can encourage and lead to further investments in SMEs and could lead to the generation of more employment and betterment of society.

Also Read: The Union Budget: What's in it for me?

However this effect could be negated by increase in indirect taxes like service tax, excise duty and sales tax.

But will there be enough measures to boost sentiment and business confidence by announcing a consumption oriented budget this time around?

The Finance Minister faces huge challenges and the expectations on this front remain muted. The duty increases that may come about on autos and other consumption products may be a dampener for business sentiment.

The other area where the government can boost businesses is by announcing a quantum jump in the financial outlay for the MSME sector in the 12th five year plan. This has been a pressing demand that could be accepted by the FM.

The tax exemption change, if any, will be a positive for businessmen and salaried individuals.