Budget 2017: Expectations of salaried class

Be it tax exemption, hiking the transport allowances, increasing the rebate cap on home loans, giving subsidies to farmers or addressing the issue of women's and senior citizens' taxation, the decision of the Finance Minister will be closely watched by one and all.

From the common man’s perspective, Union Budget 2017 could be really a litmus test for the Modi government.

Here are some changes the salaried classes expect in this year’s Budget.

Raising the Income Tax exemption limit

The common man expects the income tax limit to be increased from prevailing Rs 250,000 to Rs 400,000. This would help people save more. Additionally, increase in tax limit will kickstart savings which will ultimately lead to increase in investment and liquidity in the system.

The working women’s contribution to the national economy is also increasing slowly but steadily. As an incentive, tax exemption for them too needs to be raised to at least Rs 5 lakh.

Currently, the peak tax rate of 30% is made applicable over an income of Rs 10 lakhs for individual taxpayers. However, the income level on which peak rate is applied in other countries is significantly higher. Hence, there is a need for further raising the income level on which the peak tax rate would trigger, to make the same compatible with the international standards.

We recommends the following revised tax slabs for individual taxpayers.

Upto Rs 4 lakhs -Nil

Rs 5-10 lakhs- 10%

Rs 10-20 lakhs- 20%

Beyond Rs 20 lakhs -30%

Also Watch:  Money Guru : Expectations for common people from the upcoming budget | Part I

Deduction under Section 80C

At present consolidated deduction of Rs 1.5 lakh is allowed on all long term and short term serving instruments, including provident fund, pension funds, and equity linked savings scheme etc.

Exemption limits of allowances such as children education allowance, transport allowance, medical allowance etc are very low. So expectations are that the allowances exempted from tax are increased along with rise in exemption limits under Sections 80C from the present Rs 1.5 lakh to at least Rs 2.5 lakh.

Deduction in respect of payment of premium under life insurance policies

Section 80C allows deduction up to Rs 1.5 lakh in respect of payment of premium under life insurance policies and for other specified payments. The other specified payments include amounts invested in mutual funds, bank deposits, payments towards tuition fees etc. The government should provide a separate deduction limit of Rs 1 lakh for investment in various life insurance products.

Deduction in respect of health insurance premium/hiking annual medical insurance cap

Section 80D allows aggregate deduction of up to Rs 25,000 in respect of payment of health insurance premium and payment made on account of preventive health check-up. The Section 80D offers deductions over and above the exemptions derived from the more popular Section 80C. With the steep increase in the cost of medicines and routine medical check-ups, expectations are high for the limit to be increased to Rs 50,000 to further encourage the spread and coverage of health insurance.

Reimbursement of Medical Expenditure

Any sum paid by the employer in respect of any expenditure incurred by the employee on the medical treatment of self/ family is currently exempt from tax, to the extent of Rs. 15,000 per annum.

This limit was last revised long back and needs to be revisited in light of the rising medical and hospitalization costs especially for private hospitals.

The current tax exemption limit of Rs 15,000 per annum needs to be increased to at least Rs 50,000 per annum.

Hiking the cap on interest of bank savings A/c (Deduction on Interest earned on savings bank account)

Section 80TTA was introduced in Assessment Year 2013-14 to promote savings by providing for deduction on interest income earned on savings bank account. Currently deduction can be availed up to maximum of Rs 10,000. The government should increase the scope of the Section to include interest earned on time deposits and increase the deduction limit to Rs 25,000 per year.

Deduction in respect of investment in Infrastructure bonds

Deduction under Section 80CCF of the Act should be restored with an increased investment limit in infrastructure bonds from Rs 20,000 (allowed earlier) to Rs 50,000 for individual / HUF to boost infrastructure development.

Raising transport allowances

The transportation allowances granted by the employer to his/her employees for commuting between the place of work and residence is tax-free to the extent of Rs 1,600 per month. This limit needs to be revised upwards to at least Rs 3,000 per month, given the rising commuting costs.

Children education allowance

The education sector in India is growing at a phenomenal rate but it still needs significant attention, support and backing. Education allowance is currently exempted up to Rs 100 per month per child for a maximum of 2 children. This exemption limit was fixed in the year 2000 with retrospective effect from 1 August 1997 and seems extremely minimal considering the burgeoning cost of education. This should see a change of up to a minimum of Rs 1,000.

Tax Exemption in respect of Leave Travel Concession (LTC)

Presently, the economy class air fare for going to anywhere in India is tax exempt (twice in block of four years). However, this exemption is being allowed only for travel within India. Lately, owing to low airfares and package tours, a number of Indians prefer going abroad, instead of availing LTC, particularly to neighbouring countries like Thailand, Malaysia, Sri Lanka, Mauritius, etc., as the fares thereto are at times less than for travelling to some far away destination within India.

It is therefore recommended to grant tax exemption for economy class airfare for travel abroad also, so long these are within the overall airfare tax exemption conditions for travelling in India. Further, considering the current prevailing trend in respect of foreign travel, there is a need to include overseas travel as well for the purpose of exemption or at least to exempt proportionate expenses pertaining to travel within India in case of joint travel (within India and overseas destination).

Further, under Rule 2B of the Rules, the amount exempt in respect of LTC by air is to the extent of the economy fare of National Carrier i.e. Indian Airlines. It is suggested that word “National Carrier” should be deleted from Rule 2B.

Moreover, as per the current provisions, Leave Travel Concession/ Assistance is eligible for tax relief for 2 calendar years in a block of 4 calendar years. It is suggested that the concept of calendar year should be replaced with FY (April – March) in line with the other provisions of the Income Tax Law and further exemption should be made available in respect of at least one journey in each FY.

Also Watch: Money Guru : Expectations for common people from the upcoming budget | Part II

Hiking the cap on interest on home loan

We have great expectations from this budget, starting with support to incentivize affordable housing and permit higher tax exemption limits on interest and principal repayments for home buyers.

The deduction for interest on housing loans needs to increase from the current limit of Rs 2,00,000 considering the significant rise in rates for residential properties over the past few years. To provide relief to the tax payer this limit should be increased to at least Rs 3 lakh. This will give impetus to the housing industry, thus boosting the economy in the long run.

Payment of principal amount on home loan

There is a demand from a wider section that the deduction for principal repayment should be considered for a separate/standalone tax exemption, rather than being clubbed under Section 80C of the Act.

In the case of home loan repayments, the ceiling under tax benefits is capped at Rs 1,50,000/- for principal paid, which is very less, particularly when home loan principal repayments are clubbed with other tax saving instruments.