Union Budget 2016: 5 Key Expectations from Finance Minister Arun Jaitley

Reema Sharma

The Narendra Modi–led BJP government is all set to present the Union Budget for financial year 2016-17 on February 29.

The Union Budget will be presented at a time when the global financial markets have been rattled, sending forex and equities into a tizzy on one hand and a sharp fall in crude oil prices and global economic slowdown on the other.

FM’s budget announcement will be highly watched by all sectors amidst wide expectations that the government may announce increase in tax exemption limit on savings.

Here are 5 things to know about this year's budget for FY16.

Personal Tax

The common man keenly awaits Finance Minister’s Budget announcement with the main highlight for him being change in rate of personal tax. In last year’s Budget, Jaitley proposed no changes in personal income-tax rates. However, this year it is highly expected that the FM will give some relief for the common man who is already saddled by the burden of high price rise. The common man is pinning a lot of hope that FM will increase the minimum tax bracket from 2.5 lakh to 3 lakh.

Home Buyers

In line with rising inflation, home buyers are anticipating that the government should increases the tax deduction limits on home loan interests from the current limit of Rs 2 lakh to at least Rs 3 lakh. Furthermore, there has been a constant demand that the FM comes up with a separate provision for the principal loan amount which is currently included in 80C. Currently, the maximum limit allowed is Rs 1.5 lakh.

Increase in TDS Limit

As Finance Minister Arun Jaitley is scheduled to present the NDA government's second full-fledged Budget, small income tax payer would be keenly watching his moves on raising the threshold limits for deduction of tax at source (TDS). A high-level panel on simplification of income tax laws has recently recommended enhancement and rationalisation of the threshold limits and reduction of the rates of TDS.

Structural Reforms

While inflation and growth concerns are two core areas which the Finance Minister has to urgently address, forthcoming Budget must also set the tone of economy through structural reforms. These reforms have become all the more crucial to make the country's economy more flexible, create growth opportunities as well as incentivise investments. Underlying the importance of reforms, at the recent sixth bi-monthly monetary policy announcement RBI said, "Structural reforms in the forthcoming Budget that boost growth while controlling spending will create more space for monetary policy to support growth, while also ensuring that inflation remains on the projected path of 5 per cent by the end of FY17".

Fiscal Consolidation roadmap

While FM Jaitley must pursue the path of fiscal prudence and maintain fiscal discipline, he also has to walk a tight-rope in order to rationalise subsidies without compromising on development spending. The fiscal deficit for the entire current fiscal year has been pegged at Rs 5.55 lakh crore (3.9 percent of GDP). Hopes are high that the FM is able to rationalise subsidies, reform the legal and taxation system without having to sacrifice anything at the altar of populism.