Budget 2016 – What a Common Man Expects from FM Jaitley – The hopes are high as PM had promised ‘acchhe din’ to the people at large, but not much has happened on the ground.
With the Union Budget 2016 date of announcement getting nearer (29th February), all eyes are on Finance Minister Arun Jaitley. The government typically receives a whole lot of suggestions from citizens of India and it has been no different this time either. The common man is expecting a lot from the PM Narendra Modi led NDA government’s third budget. The hopes are high as PM had promised ‘acchhe din’ to the people at large, but not much has happened on the ground. In fact, expectations were belied after the government actually urge citizens to give up their LPG subsidy and now they are also paying a ‘Swacch Bharath’ cess of 0.5% on all taxable services. So, keeping all things in mind, here is a Budget 2016 wish list of the common man.
Increase in income tax exemption limits
Whenever it comes to the expectations from the Budget, the woes of the salaried class come into focus. Given the rising cost of living, the salaried class is expecting that the basic exemption limit be hiked to Rs 3 lakhs from the current Rs 2.5 lakhs. There is also a widespread expectation that FM Arun Jaitley will add some more savings products and hike the limit of exemption to Rs 2 lakh from Rs 1.5 lakhs currently under Section 80 C and revise the overall limit to Rs 2 lakh. Along with this, there is also an expectation that the Government will rationalize house rent allowance (HRA) exemption. Currently this exemption is calculated as the amount which is least of rent minus 10% of basic salary. In case one stays in a metro, actual rent paid and 50% of basic salary or 40% in case of residence in any other city. Cities like Pune, Hyderabad, Bengaluru and Gurgaon have attracted a lot of professionals and here rents have gone up considerably. There is therefore an expectation that Arun Jaitley would extend the rule of 50% of rent to such cities as well.
Deduction of interest on housing loan
A roof over one’s head is a necessity for all and sundry. Given the fact that the PM Narendra Modi government is widely advocating ‘housing for all’ home owners are expecting that they will receive a 100% deduction on home loan interest. Currently homeowners are eligible for deduction of only up to Rs 2 lakhs under section 80 C. Also for houses that are under construction, this deduction is only Rs 30,000 that too if the construction of the house is completed after 3 years from the end of the year in which the loan has been availed of. This provision has caused a lot of heartache to property buyers because there after often delays well beyond 3 years in case of the completion of housing projects. There is therefore a widespread expectation that the government will allow interest deduction without a cap of Rs 30,000 and will be calculated from the year in which possession is due.
Make NPS more attractive
The National Pension Scheme is widely advocated by the Government. However, it is taxed in a manner that even though there are tax exemptions at the time of making investments, there is taxation when the corpus is encashed along with the returns on the investment. This makes NPS less attractive as compared to other investment avenues that allow for tax free withdrawal. Therefore, in order to make the NPS more attractive, there is an expectation that the FM will make the withdrawal under NPS tax free to bring it with par with other pension oriented schemes.
Further incentives for startups
India is a nation where entrepreneurship is on the rise and startups are cropping up nearly every day to cater to needs of a wider target audience. The PM Narendra Modi-led NDA government has shown in the recent past that it is keen to improve the ecosystem for startups. In January 2016, the government announced exemption of income tax on the profits made by startups for the first three years among other benefits. Start-ups however opine that they do not make profits in the first three years and thus are expecting that this tax holiday be extended to a least of five years during the Budgetary announcements.
Keeping great expectations grounded in reality
While expectations are a-plenty from all sections of the society be it the common man or the industrialist, it is true that the Indian economy is currently in a deflationary phase with earnings stagnating and exports declining. The largest challenge for the government now is to keep the fiscal deficit to 3.9% of the GDP. In the face of such challenges, it wont be surprising if Budget 2016-17, does not turn out to be a populist one. However, overall, the common man expects that he be allowed to live well and provide for his family in the face of rising costs and save for his future.
Source: Financial Express