The first Budget of the Narendra Modi government was hailed as the harbinger of acche din. It gave a bonanza to taxpayers by simultaneously increasing the basic exemption limit and the tax deduction under Sec 80C. However, the subsequent Budgets have not been so generous. While some more deductions have been offered to taxpayers, Budgets have also taken away some tax benefits or levied additional taxes.

The 2015 Budget, for instance, was not too friendly to the super rich in particular. The surcharge of 10% on incomes above Rs 1 crore was increased from 12% to 15%. The next year, a 10% surcharge was introduced for incomes between Rs 50 lakh and Rs 1 crore. The final blow came last year in the form of 10% tax on LTCG from equity investments exceeding Rs 1 lakh in a year.

At the same time, the Modi government has done away with some anachronisms. It abolished the wealth tax, and hiked the deduction limit from Rs 2,000 to Rs 5,000 a month under Section 80GG for those who don’t get HRA.

With three weeks left for the interim Budget, there are high expectations of a tax-friendly Budget. Rumours are rife that the government will try to woo middle class taxpayers by offering major tax benefits. Higher savings limit, concessions to pensioners and higher relief on housing loan rates are a few measures under considerations, according to news reports.

Are these expectations realistic? For one, the Rs 1.5 lakh deduction under Section 80C needs to be reviewed. It was last changed in 2014 after a gap of 10 years. This limit quickly gets exhausted due to the multiplicity of investments included under Section 80C. If you take into account the additional investment limit for NPS, the actual deduction is higher at Rs 2 lakh. Still, the government should raise the deduction under Section 80C to Rs 2 lakh with an additional Rs 1 lakh deduction for NPS .

Increasing the basic exemption limit is tricky. While it will benefit all taxpayers, it will also lead to a tax loss for the exchequer. It is estimated that every Rs 10,000 increase in the basic exemption leads to a tax loss of about Rs 2,000 crore for the exchequer.

Tax timeline since 2014
Personal tax changes introduced by the BJP-led government in the past five Budgets

Budget 2014
Basic tax exemption limit raised from Rs 2 lakh to Rs 2.5 lakh.
Deduction limit under Sec 80C raised from Rs 1 lakh to Rs 1.5 lakh.
Deduction limit on home loan raised from Rs 1.5 lakh to Rs 2 lakh a year.

Budget 2015
Additional deduction of Rs 50,000 on contribution to the NPS.
Sukanya Samriddhi Scheme made tax free.
Deduction on health insurance premium increased from Rs 15,000 to Rs 25,000.
Tax-free transport allowance limit hiked from Rs 800 to Rs 1,600 per month.
Wealth tax abolished
Surcharge on individuals with income above Rs 1 crore raised from 10% to 12%.

Budget 2016
Deduction for rent payers raised from Rs 24,000 to Rs 60,000.
Tax rebate for taxpayers with income below Rs 5 lakh raised from Rs 2,000 to Rs 5,000
Additional exemption of Rs 50,000 for new home buyers on loans up to Rs 35 lakh.
Surcharge on income above Rs 1 crore increased from 12% to 15%.

Budget 2017
Tax rate for income between Rs 2.5 lakh and Rs 5 lakh reduced from 10% to 5%.
Tax rebate of Rs 12,500 offered to all taxpayers.
10% surcharge introduced for incomes between Rs 50 lakh and Rs 1 crore.

Budget 2018
Standard deduction of Rs 40,000 reintroduced for salaried individuals.
Medical and transport allowances to be taxed.
Increase in cess from 3% to 4% for taxpayers
10% tax on LTCG from equities exceeding Rs 1 lakh.