Everyone looks forward to the budget every year with high hopes and expectations. The salaried-class, especially, hopes against hope that they will get some relief from with respect to Income Tax. The general ask is to either have a higher tax-exemption limit or more tax breaks.
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Here are the expectations from the common man.
Higher income tax exemption limit
Right now, the tax exemption limit for individuals is set at 2.5 lakhs. People are hoping that this will be raised to 3 lakhs. However, this might not happen as the Government, in the interim budget, has already raised the income limit to get a full tax rebate for individuals (under Section 87A) from 3.5 lakhs to 5 lakhs. Still, one can hope.
Increase in the deduction limit under Section 80C
Currently, the tax exemption limit for investments you can make under Section 80C of the Income Tax Act is 1.5 lakhs. This might be raised to 2 lakhs. If this happens, people will be able to invest more in the Public Provident Fund, Employee Provident Fund, Life Insurance, ELSS, National Savings Certificates, National Pension Scheme, and tax-saving Fixed Deposits.
Additional Reading: Tax-Saving Investment Options Under Section 80C
More tax benefits for healthcare
Healthcare expenses can be quite high, especially if you are not insured. In cases like this, people sometimes end up taking a Personal Loan to meet their expenses. Hence, the Government encourages people to invest in Health Insurance by providing tax benefits under Section 80D of the Income Tax Act. Currently, the limit is Rs. 25,000 for people who are below 60 years and it is Rs. 50,000 for people who are above 60 years. The ask is that these limits be increased. Fingers crossed!
Additional Reading: 7 Helpful Tips To Choose The Right Health Insurance Plan
NPS to get exempt, exempt, exempt (EEE) status
The National Pension Scheme (NPS) is a popular tax-saving investment option under Section 80CCD of the Income Tax Act. Once you exhaust the 1.5 lakh limit under Section 80C, you can make an additional investment of Rs. 50,000 in NPS. Earlier NPS fell in the EET category which means that your investment was tax-free at the investment and accumulation stages but partially taxable at the withdrawal stage. The Union Cabinet had approved making the withdrawal of NPS 100% tax-free. However, this has not yet been notified. The hope and expectation are that this will be included and implemented in this year’s budget. One also has hopes that the Rs. 50,000 deduction limit will be increased to 1 lakh.
Additional Reading: Why you should choose NPS as a tax-saving investment
Relief from long-term capital gains (LTCG) tax on securities
People are looking forward to some relief from the long-term capital gains tax on securities in this year’s budget. Industry leaders hope that the existing tax will be removed entirely or that the rate will be cut. There is also some speculation that the current exemption limit of 1 lakh will be hiked to 2 lakhs. We’ll just have to wait and see.
Additional Reading: Long-term Capital Gains On Mutual Funds
Tax-free infrastructure bonds may see a comeback
One of the goals of the Government is to provide the country with world-class infrastructure. And what better way to raise money for infrastructure projects than through the reintroduction of tax-free infrastructure bonds? These bonds are referred to as tax-free as the interest from them is not taxable. This instrument is a good way for the Government to raise long-term finance – the maturity period of these bonds is usually 10 years or more. Furthermore, infrastructure projects will spur job growth and give the infrastructure sector a boost.
So, what’s the deal with inheritance tax?
Recently, there was a debate in the Finance Ministry on inheritance tax. People have had mixed feelings about this as, on one hand, the tax is pro-poor. On the other, one wonders how much this will affect the middle class. The expectation is that an inheritance or estate tax might be introduced at a very marginal rate and might apply only to “super-rich” individuals. The introduction of this tax is somewhat controversial and might be tricky to implement as people who inherit property might not have the resources to pay the tax without selling a part of the property. Another concern is that people may hold the property under a trust, which runs in perpetuity, to avoid paying the tax. Let’s wait and see what the Government decides to do.
Additional Reading: Understanding Inheritance Tax in India
More tax benefits for Home Loans, maybe?
The real-estate sector has been down in the dumps. So, if more tax benefits on Home Loans are offered in the budget this year, it might give the real-estate market a good boost. Under Section 24B of the Income Tax Act, a person with a Home Loan can claim a deduction of up to 2 lakhs on the interest section of the loan. There is an expectation that this limit will be increased to 2.5 lakhs. If this is done, it will help taxpayers save a significant amount of tax through their Home Loan.
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