If I were FM: Nikhil Kamath recommends uniform corporate tax rate in Budget 2023

As part of a Budget special series by ETMarkets.com, we reached out to money managers seeking their perspective on Budget 2023 with a simple question: What if I were the Finance Minister of India.

The agenda for this financial year would be to redefine fiscal consolidation and work towards achieving the target of 4.5% (fiscal deficit) from the current 6.4%.

Though the nominal GDP growth projection for FY23 has allowed some breathing space for deficits, no tax cuts will be incorporated considering the general elections of 2024.

Still, existing taxation policies will witness beneficial reforms. More focus will be paid to Capex and quality of expenditure, promoting Capex allocation at a state level by offering various benefits.

Household savings have been declining (FY21 vs FY22 at 15.9% vs 10.8%) and must be incentivised, given the erosion of purchasing power due to inflationary pressures.

We will take significant steps to raise productivity in the real economy and focus on improving rural jobs. Clear disinvestment targets would be better if there is a strategic stake sale in a few companies rather than minor divestments in more companies.

Allocation of capital for boosting growth and productivity and providing relief and inclusivity to the bottom of the pyramid.

A few reforms in the tax structure would include simplifying the capital gains tax policy and introducing a uniform corporate tax structure (Currently, different sectors in India are taxed at different income tax rates. To position India as a competitive hub for both manufacturing and services industries, introducing a uniform corporate tax rate would not only bolster the manufacturing sector but also allow the service sector to thrive. However, partnership firms and LLPs are still taxable at a flat rate of 30%). For individual taxpayers, an increase in the basic exemption limit, the 80C deduction limit, and the PPF limit will be looked at.

PMS and AIF taxation structure will be improved to gain investors’ attention and optimise gains.

The country’s education system witnessed many changes due to Covid; the government can focus on improving the structure and work towards making education (spend) 6% of the country’s GDP and encourage states to implement NEP policies effectively.

India’s unemployment rate in India year-wise ranged from an all-time high of 23.5% in April 2020 to a record low of 6.4% in September 2022, with an average of 8.2% between those years. As of December, the unemployment rate is at a 16-month high of 8.3% and remains one of the significant challenges this year; hence, funds allocated for MNREGA would be increased in addition to schemes like PLI and Gati Shakthi that have the potential to create lakhs of jobs.

(The author is Co-founder, True Beacon and Zerodha)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)