We all are eagerly waiting for the 29th February to see the highlights of the Union Budget. This budget is not so easy given task in the hand of Finance Minister, as the global financial markets have been rattled, sending forex and equities into a tizzy on one hand and a sharp fall in crude oil prices and global economic slowdown on the other. Also, their party is facing opposition attack ahead of Budget Session on the ground of inflation in the country. The common man keenly awaits Finance Minister’s Budget announcement with the main highlight for him being change in rate of personal tax. If we believe on Pre budget news this year it is highly expected that the FM will give some relief for the common man who is already saddled by the burden of high price rise. The news is in the market that FM will increase the minimum tax exemption from 2.5 lakh to 3 lakh.
Revenue Secretary, Government of India has said to a TV Channel that from the taxation perspective, the forthcoming budget would aim to promote growth, employment and provide a level playing field to Indian domestic manufacturers. Further, he added that the thrust of the budget would also be on ‘Make in India’ as well amongst other things.
FM’s budget announcement will be highly watched by all sectors amidst wide expectations that the government may announce increase in tax exemption limit on savings. On the one side, corporate taxpayers are waiting for the reduction of tax structure to 25%, on the other common man is expecting increase in minimum tax exemption limit. But a part of common man is still hopeless as they are still the maximum tax payer as against their total income, and that part of common man is Private Salaried persons. They were ignored since years as they are not the citizens of the country. Before the previous year budget presentation, the salaried people specially from the Private Sector was hoping for their “Achchhe Din” but end up with a sigh. Again this year, Salaried tax payers hoping to receive massive tax relief in the form of standard deduction from salary. This will be a welcome change resulting in higher take home salary in wake of the rising inflation. This could be brought in either by way of percentage deduction on salary or a flat deduction from salary. Though, personally I am not very hopeful for such an announcement in this budget.
I emphasized on the salaried persons of Private Sector specifically because government employees enjoy various tax free benefits, including medical benefits, vacation benefits, leave payments, sick leave and other income security benefits. Benefits make a position valuable even if the salary offered is lower than a private-sector salary. Government employees more often get retirement benefits from their employer. While Private Sector employees get everything with the tax deductions.
Apart from the enhanced minimum exemption limit and Standard deductions, the other expectations by this part of the common man from this year budget are given hereunder. If all or some of these benefits are included by the Finance Minister in his Budget 2016-17, this will definitely improved the buying capacity of these private sector employees.
Promotion of savings are in the blood of Indians, the inflation coupled with limited tax incentives proved to be detrimental to the salaried class taxpayers aspirations to save more for a rainy day. In order to boost savings, the current limit of exemption under Section 80C need to be enhanced up to a level of Rs 250,000.
As was mentioned in my earlier posts, that deduction of interest on housing loans is required to enhance from the current limit. Increased in the prices of real estate sector over the years, the current limit is insufficient as the interest liability for buying a house by common man is much higher than the present prescribed deduction limit. The higher deduction encourages these individuals to avail housing loans and thereby also boosting the real estate sector resultant in higher tax returns to the government.
The exemption limit for transportation allowance which was fixed at Rs 800 per month almost a decade ago does not seem practical anymore. Travel costs have almost tripled in the past 10 years and the limit for transport allowance exemption need to be revised to atleast Rs 3,600 per month.
At present, salaried persons get an exemption for of Rs 100 per month, per child towards education and Rs 300 towards hostel expenses and that too up to 2 children. These limits were set 15 years back and today need to be increased to match the much higher costs of education and hostel expenses in recent times.
Apart from the unreal exemptions mentioned above, some other exemptions like leave salary emption, which has not been revised since many years, is needed to be increase from the current Rs. 3.00 lacs. Also, the reduction in lock in period for fixed deposits under section 80C of 5 years etc.
Another expectation is on raising the threshold limits for deduction of tax at source (TDS) on various deposits. Government should check its unclaimed TDS data before taken this into account, the TDS deducted on the deposits of small uneducated farmers deposits remain unclaimed and seems unethical too. A high-level panel on simplification of income tax laws has recommended enhancement and rationalisation of the threshold limits and reduction of the rates of TDS for individual tax payer.
Well, the day of 29th February will show us whether the expectations will be converted to reality or they are far too ambitious for the Modi-fied government as was the previous budget. Whether we get pleasant surprises or unexpected shocks this year, we shall take it in our stride and again will hoping the same from the next budget to achieve good governance.