The Union Budget for 2017-18 could be a historic one for many reasons, not the least because it will be presented on 1 February instead of the traditional end-of-February ritual. The Cabinet Committee on Parliamentary Affairs (CCPA) today decided on budget presentation on 1 February while advancing the Budget Session of Parliament- it will commence from 31 January this year.

The budget this time is not only expected to assuage the aam aadmi with widely expected income tax sops, the very act of bringing it forward also means each department and ministry of the government will get funds for FY18 by the beginning of the fiscal year. Earlier, the budget proposals were presented at the end of February and cleared by around May. So, funds arrived well late into the fiscal, hampering smooth functioning of ministries. This budget will be historic for another reason as well - after 92 years, there will be no separate Rail Budget. The Rail Budget will be merged into the General Budget. With this merger, the Railways may be exempted from paying the annual dividend for getting gross budgetary support from the government.

So what to expect from a budget which may create history? The biggest expectation from the budget for 2017-18 is some sort of relief for the aam aadmi, who has been reeling under the after-effects of demonetisation. And indications are, the government may oblige with some relief in personal income tax. Finance Minister Arun Jaitley has himself indicated strongly that income tax sops are coming.

Finance minister Arun Jaitley - PTIFinance minister Arun Jaitley - PTI

Jaitley said while inaugurating the professional training of IRS officers "... What you need is a broader base of economy for which you need a lower level of taxation. You need to manufacture products and provide services which are more competitive in character and therefore your taxes have to be globally compatible." A broader tax base automatically means bringing more citizens into the tax net by lowering the tax slabs. Since Jaitley’s comments come just ahead of the budget announcements, many interpret them as an indication of imminent tax sops. As of now, those with an annual income greater than Rs 5 lakh annually are charged 20 percent as tax, those with income greater than Rs 10 lakh are paying 30 percent in income tax. This Economic Times piece, however, predicts “sweeping” recast of direct taxes – both personal income tax and corporate tax – in the upcoming budget.

Industry chamber Assocham has also already petitioned the government over lower income tax rates, saying in its pre-budget memorandum that “the income tax rate for individuals should be reduced and threshold limit should be increased in view of the current situation prevailing in the country”.

The budget may also bring with it some pain. The ET piece quoted earlier predicts that the dividend taxation framework is likely to see more changes in order to make it more onerous for those receiving the bulk of their income in this form to make the regime more equitable. Put simply, there could be higher taxes for those who gain from investing in the stock market – whether long term or short term remains to be seen. In fact, the Prime Minister has already made a widely quoted speech where he said that gains from stock market investments would be taxed higher – something Jaitley called a misrepresentation by the media. Now, there are reports that if not short term, at least long term capitals gains tax rate could see an increase.

Not just aam aadmi, even India Inc may be appeased this budget. Captains of Indian industry have been somewhat assuaged post demonetisation by banks cutting lending rates over the weekend, but they continue to anyway hope for a lower corporate tax rate. In its pre-budget presentation to the Finance Minister, apex industry chamber CII has already made a strong pitch for bringing down the effective corporate tax rate to 18 percent - which should include all surcharges and cess – from the present 19.5 percent.

“We propose that corporate tax be brought down to 18 percent including all surcharges and cess. In return we can remove all tax incentives, concession and need no grandfathering of previous incentives. Our calculations of PBT and tax foregone in 2014-15 indicate an effective rate of 19.8 percent without any tax incentives/ concessions. We believe that in the past when corporate tax has been lowered, corporate tax collection has gone up. An 18 percent corporate tax should therefore not lead to revenue loss to the Government and at a stroke move us away from a high tax, high concession regime,” CII said. If this does happen, this single move will bring India on par with the most attractive international investment destinations such as Singapore, Sri Lanka, the UK and Turkey.

The thing to look out for in the upcoming budget is this: in the toss-up between the personal income tax rates and corporate tax rates, which will win? Both may not. Hectic lobbying by India Inc already seems to have tilted the scales in favour of reduction in corporate tax rates instead of personal income tax slabs. Corporate tax accounted for a little less than a fifth (19 percent) of the government’s receipts last fiscal whereas income tax receipts accounted for just 14 percent of total receipts. Together, these two tax heads accounted for a third of government’s revenues.

Some other suggestions from India Inc include acceleration in PSU disinvestment. CII has said government should divest/ privatise 100 companies including the 74 identified by NITI by December next year. On employment, it has suggested reducing the effective cost of creating good quality jobs. The chamber has asked the government to extend the policy framework, such as fixed term employment and PF norms, provided for textile and apparel to all sectors to boost job creation