The Indian economy was growing at a rapid pace, with a GDP growth of around 7.6%, and with the introduction of GST was expected to grow at even a faster rate. Just when everything was looking great for the economy it was struck by the demonetisation shock. Though the move was great for combating black money, it has caused significant liquidity issues in the economy. However, every cloud has a silver lining and the pain of demonetisation may be addressed by the finance minister in the Budget through a host of tax incentives to both individuals and corporates.

With inconvenience caused to the common man by demonetisation, many are expecting the government to increase tax exemption from R2.5 lakh to R4 lakh. There may also be a change in the point at which 30% tax rate kicks in, which may be increased from R10 lakh to R12 lakh. Currently, less than 3% of the population files income tax returns and a higher tax exemption slab and a reduced tax rate may encourage more people to file their tax returns.

Section 80C has a maximum limit of R1,50,000 and most of the investments come under this bracket. The FM may revisit and increase the limit up to R2,00,000. This would also encourage individuals to save more and contribute towards the economy.