Income tax expectations for the salaried from PM Narendra Modi's government
February, 13th 2015
The Narendra Modi government is all set to present its second budget on February 28th. Like its maiden budget, which managed to provide some relief to tax payers, there are many expectations from the second budget too.
Finance minister Arun Jaitey may go ahead with the objective of sabka saath sabka vikas and get the people of India participate in the India growth story. Also, boosting savings is on the cards as this will benefit the country and the people in the long run. Here are some expectations of a common man from the budget:
Increase the limits of tax slab
The first budget increased the exemption limit by Rs 50,000. However, the common man wants more. Increase in the exemption limit by another Rs 50,000 (ie. from Rs 250,000 to Rs 300,000 as proposed by the DTC standing committee) shall leave more income at the disposal of taxpayers. In turn, it would increase the rate of consumption and investment at a macro level.
Re-introduction infrastructure bonds
In order to promote investments in infrastructure, the government had introduced long-term infrastructure investing options by providing an avenue of participating in long-term bonds. Re-introduction of infrastructure bonds and providing tax exemption up to Rs 50,000 would be a welcome change and help the country and the government achieve its objective of sabka saath sabka vikas.
Increase the exemption limit of various allowances
Living in an era where the growth of economy is driven by the quality of manpower, education stands at the top of priority list. The cost of education has become a major factor affecting the quality of education being imparted. The exemption limits of various allowances like children education (Rs 100 pm) and hostel expenditure (Rs 300 pm) have not been revised for over a decade and may be re-considered by the government.
Increase the exemption limit under 80C
Budget 2104 increased the deduction under section 80C from Rs 1,00,000 to 1,50,000. A further increase in the exemption limit from Rs 150,000 to 250,000 will boost the savings at the national level.
Increase the medical reimbursement limit
Currently, reimbursement of medical expenses is exempt up to Rs 15,000. The limit was set in 1998 and in the light of increasing medical costs, there's need for the limit to be revised. The salaried Individuals expect the government to increase the limit to Rs 50,000 so as to bring it in line with the proposed DTC. To some extent, this could help to bring the tax benefit up to speed with the rising medical costs.
Increase the transport allowance exemption limit
Transport allowance is currently exempt up to Rs 800 pm. This exemption limit was introduced for the first time in 1998. The exemption limit of Rs 800 pm should be raised upwards to Rs 4,000 pm to bring it in line with the rising inflation.
Reduce the lock in period on fixed deposit
Investment in fixed deposits is a popular investment avenue across tax payers. A lock in period of 5 years becomes a hindrance for certain investors and reducing this period to 3 years would attract investors. It will also bring it with par with schemes like ELSS which provides for a 3-year lock in under section 80C itself. This will also help boost savings at a macro level.