The expectations are high from Finance Minister for some charismatic announcements in the upcoming Union Budget that will be presented on the last day of February. Whether Mr Jaitley presents a Budget that pleases the industry or his announcements are likely to be aimed at foreign investors, who have played a big role in boosting India’s stock markets.
Economy not been able to rebound as fast as earlier expected, also the corporate earnings have also failed to live up expectations. Earnings of the industries declined for the past three quarters. A reform policy announcement is being expected from the upcoming budget and to fulfil the expectations of foreign investors.
Apart from these corporate expectations, the middle class is expecting relaxations and change in the slab of Income tax. As was expected from the current government and their promises being made since long for the lower and middle class people, the expectations are much higher for reformation of personal income tax slabs. Whether, Finance Minister would do well by announcing a plan on the lines of corporate tax, where the tax rate is to be brought down from 30% to 25% over four years beginning 2016-17 with phasing out of exemptions or shall re-jig the slabs for individual taxpayers?
Instead of tinkering in the exemption limit year after year, it is time that the government opts for a stable and long-term approach by making slabs more practical. Current scenario of counter pressure of inflation and with a view to provide greater buying power to the middle class, the following slab needs to be implemented for individual tax payers.
Tax Slab Tax Rate %
0.00 to Rs. 350,000.00 NIL
350,001 to 800,000.00 10%
800,001 to 1,500,000.00 20%
1,500,001 and above 30%
1. It would be rationalize to provide various exemptions to only those people having income under Rs. 8,00,001.00 (i.e., 20% slab) only. After an income over Rs. 8,00,001.00, no exemptions under Section 80C should be applicable. Though, the additional surcharge and cess need to be cancelled for all individual taxpayer.
2. Standard deductions for salaried persons should be restored to bring parity with professionals and business persons, who are entitled to various deductions.
3. Ceiling of Interest on housing loan specifically Self occupied houses needed to be increased or to be directly linked with Salary being drawn by individuals, as different cities having different rates of properties, also different class of individuals invest in different class of properties.
4. The limit u/s 80D should be increased to Rs. 30,000.00 from present limit of Rs. 15,000.00, as some Indians spend their life savings, their properties to cover the medical expenses.