This will be the last regular budget ahead of the 2019 General Elections. However, there are few wishes that every taxpayer would hope for from the Union Budget.
The Union Budget for the financial year 2018-19 will be the last regular budget ahead of the General Elections in 2019, making it a significant one. Hence, from common people to investors, salaried to self-employed, everyone would be hoping for few tax benefits that will make their life easier.
Like always, every budget brings it shares of anticipation and excitement. What will it offer? Will it tread the same, standard path or, will it be different this time? Nevertheless, there are few wishes that every taxpayer would hope for from the Union Budget.
Let’s take a look at some wishes from the taxpayer:
Tax Slabs And Exemptions
This is the most awaited announcement ever year for taxpayers. Currently, individuals earning up to Rs. 2.5 lakh per annum are exempted from any tax. But as the cost of living has gone high, the expectation is high for a modification in the current tax slab structure.
While exempting a large chunk of the population completely from the tax is detrimental from the revenue point of view for the government, what it can do is increase exemption limits under various sections to help people save taxes. Currently, a taxpayer can avail deduction up to Rs. 1.5 Lakh per year under Section 80C, 80CCC and 80 CCD(1) as per Section 80 CCE of the Income Tax Act. This limit was increased to Rs. 1.5 Lakh from Rs. 1 Lakh in 2014. The last revision before this was in 2003. So, there has been just 50% revision under this section in the last 14 years.
Hence, there should be an increase in this limit to anywhere between Rs. 2 to 3 lakh. This will enable more money in the hands of taxpayers who would look to invest in financial assets rather than hoarding in gold and other liquid assets.
Extending Benefit Under Section 80 D For Senior Citizens
There are only a few taxpayers who have crossed 80 years of age and can enjoy the benefit of claiming expenses incurred for medical treatment up to Rs. 30,000 under Section 80 D. Hence, this tax benefit is ineffective to many senior citizens who are between 60 and 80 years of age. The government should extend it to all those individuals who have completed 60 years of age and provide more security and in-hand income to them.
Increase Medical Reimbursement Limit
Medical reimbursement is a great way to save tax when structuring your salary. But the current limit set at Rs. 15,000 is remarkably low for the high medical expenses that have shot up in the last decade. This limit was set years back and is not relevant at the moment. The taxpayers expect the limit to be extended.
Bring NPS Under EEE Regime
The National Pension Scheme (NPS) is a great return scheme but continues to be unattractive largely due to the taxation of at least 20% of the corpus at the time of withdrawal. Besides, a majority must be mandatorily parked in an annuity. The government must allow a higher corpus to be withdrawn without tax implication and also raise annuity rates for NPS. Considering NPS is pitched as an alternative to PPF which falls in the EEE category, it is only fair to bring NPS under the EEE regime.
Fixed Deposit Returns
FDs have always been the safest saving option, and until sometime back gave decent returns as well. But given that rates have significantly fallen for FDs, the actual returns also gets further reduced. To protect pensioners and low-risk taking investors, the FD returns need to be brought at par with debt mutual funds where your income is taxed only at redemption and the tax should be calculated on the Long Term Capital Gains at 20.6% with indexation benefits if redemption is after three years.
Separate Tax Exemption For Term Insurance
When we think of life insurance, many of us find it an added expenditure if our finances are sorted as there is no money back guarantee with term plans. A term plan helps your family by providing financial support in case of your demise. Hence, buying a term insurance makes sense for everyone.
The maximum tax exemption limit under Section 80C of the I-T Act is Rs 1.5 lakh presently for insurance investments. A separate exemption limit for Term Insurance premium will attract more people to invest in this product.
Make Separate Exemption For Principal Repayment on Home Loans
Currently, you can claim a deduction of up to Rs. 1.5 Lakh on repayment of the principal amount on housing loans on residential property under Section 80 C. However, this section is already overcrowded with other deductions such as contribution to PPF, investment in NSC, tax-savings funds and more. Over the years, the cost of properties has significantly increased, leading to higher EMIs for home loans. Hence, the government should create a separate exemption limit for such deductions to provide better tax relief to home buyers.
Extending Benefit For First Time Home Buyers
The Section 80EE of the Income Tax Act provides for an additional deduction of Rs 50,000 for first time home buyers who got their loan sanctioned between April 1, 2016, and March 31, 2017. This should extend to home buyers whose loan got sanctioned after March 2017.
Widen The Repayment Window For Education Loan
The interest paid on education loan can be claimed as a tax deduction under Section 80E. However, this benefit is available only for eight years. Considering the benefit was introduced in 2006 when the cost of education was much lower than what it is now, the window for tax deduction must be extended as one might need a longer period of time to pay off the loan.
Being the last regular budget of the current government, the citizens would be hoping for better sops and tax relief this time around.