Union budget may take some pro-people steps. One may see measures such as increase in section 80C limits, increased incentives to home buyers, increasing minimum exemption limit among others.
With its massive drubbing in the Delhi Assembly Elections, the BJP government is likely to attempt to keep the euphoria of the Modi wave alive with a ‘please all’ Budget for the financial year 2015-16. The budget will attempt to be mindful of retaining BJPs charm in its recent assembly electoral gains in states other than Delhi. This budget will be largely focused on the ‘Make in India’ campaign, but what the common man can expect from the Budget this year, let’s take a look –
Increase in Section 80C limit – Section 80C is the most popular way the government can encourage savings for the salaried. Under this section certain investments and expenditures are allowed to be deducted from the total income. And tax is payable on the Income less these deductions. The Finance Minister had raised the Section 80C limit from Rs 1,00,000 to Rs 1,50,000 in the last budget. However, India’s household savings have not been growing well enough to support the growth in the economy. Additionally, Section 80C is now overcrowded with a plethora of investments and expenses which are allowed to be claimed under it. So government may actually look raising the limit under this section. This will have the twin benefit of more tax saved for the common man and higher savings to fuel the government’s growth plan.
Increase in tax benefits on home ownership – An owner of one house property which is self occupied can claim a deduction of Rs 2,00,000 on the interest for the loan taken for buying this property. This limit was increased from Rs 1,50,000 in the last budget. Increasing this limit further will help many prospective buyers take the plunge of buying a home as well as positively impact growth and investment in the housing sector. Section 80EE that allowed an additional deduction of Rs 1,00,000 to first time home owners when certain conditions were met is not valid from financial year 2015-16. Therefore it is highly likely the government will increase tax benefits on home loans and may bring in a special package for first time home owners.
Increase in minimum exemption limit and rejig of tax slabs – While in the last budget the Finance Minister raised the limit of minimum income which is exempt from tax from Rs 2,00,000 to Rs 2,50,000, a further increase in this exemption limit is likely. Rising cost of living has made it challenging for people (especially those earning below Rs. 5,00,000) to meet regular expenses. The Modi government is largely seen as pro big business, it will hopefully dole out benefits to the low income groups to gain popularity in this segment. A relook at the income tax slabs which were left untouched in the last budget may also be attempted.
Scrapping of RGESS – Rajiv Gandhi Equity Savings Scheme was aimed at encouraging new retail investors to invest in the stock markets and help them save a maximum of Rs 25,000 under section 80CCG. The BJP with its penchant to scrap anything related to the Gandhis and the poor response of this scheme are both good reasons for this deduction to get folded. The scheme has been largely unpopular owing to its complex conditions and restrictions which did nothing to encourage retail investment in stock markets. The government must attempt to give it a new avatar, simplifying the scheme and increasing the deduction to make it attractive for the retail investors.
Health Cess of 1% - As a nation our investments and expenditure on the health of our people is terribly low. The poor are far removed from the provision of basic health and medical services. The Health Ministry has been mulling a health cess of 1% just like the education cess of 2% and additional 1% cess on secondary and higher education which is already being charged on total income tax. If the government provides tax benefits it may balance them by charging a health cess and show its commitment to improving basic health care for the poor and the underprivileged class. The government has a tough task at hand balancing the expectations of the common man as well as focusing on its growth agenda. Its direct tax collection targets have not been met and the pressure to deliver on its ‘achhe din’ promise is setting in.
Source : http://www.moneycontrol.com/