There are a lot of expectations from Budget 2018 and the common man is hoping that with a number of fiscal reforms already in place, and with direct tax collections up post the demonetization period, the government would provide some relief in personal taxes. The Government will be presenting their last comprehensive Budget in February 2018. With the Lok Sabha elections round the corner in 2019 a common belief is that the Government is likely to come out with a populist budget, something that provides relief to the “aam aadmi”.
Here are a few items which are on the wish list of the common man:
Increase in the basic exemption limit- It is expected that the basic exemption limit would be enhanced from Rs 250,000 to Rs 300,000, considering that the slab rates were last revised in Budget 2014. For senior citizens, the exemption limit should be enhanced from Rs 300,000 to Rs 350,000.
Increase in deduction available under section 80C
At present, investments in the prescribed investments under section 80C are eligible for a deduction up to Rs 150,000. There may be a scenario where the said limit may be increased to Rs 200,000.
Exempt National Pension Scheme (NPS) withdrawals completely
Currently, the NPS is not as popular as there is a partial taxability on withdrawals at the time of closure or opting out of the pension scheme. To make it popular like the PF and the PPF, it is suggested that such withdrawals on closure of the scheme should be made entirely exempt.
Increase deduction limit on contribution to NPS
Under section 80CCD(1B) of the Income tax Act, an assessee is eligible for an additional deduction on contribution to NPS scheme up to Rs 50,000. It is suggested that this deduction should be increased to Rs 100,000. Such a move would provide the much needed fillip to the NPS scheme and lead to fulfilment of the Finance Minister’s dream of a pensioned society.
The Finance Minister could consider re-introducing infrastructure bonds. Any investments in such bonds by individuals and HUFs could provide an additional deduction of up to Rs 50,000. This could also provide a boost to the infrastructure sector.
Increase exemption limit for medical expenses
Currently, medical expenses paid by the employer up to Rs 15,000 are exempt from tax. Considering that medical expenses have shot up manifold times and the limit was raised more than 15 years ago, it is expected that the limit would be enhanced to Rs 30,000 per annum.
Increase the limit for deduction of home loan interest on self-occupied property
Prices of real-estate has shot up and the common man relies heavily on home loans for funding purchase of property. However, the deduction for interest on home loan for a self-occupied house property is restricted up to Rs 200,000. It is expected that the Finance Minister could enhance the limit for deduction on home loan interest to Rs 300,000 per annum.
Re-introduction of standard deduction
To provide some relief to the salaried class, the Finance Minister may consider re-introduction of Standard Deduction. The amount of relief could be 40% of the salary subject to a cap of Rs 50,000.
The above suggested measures may bring some relief and increase disposable income for the common man, which will in turn provide a shot in the arm to the economy.
In the recent times, there have been talks about aligning the tax year (April-March) with the calendar year (January-December). There is a possibility that we may get to hear something about this from the Finance Minister on February 01, 2018.