Budget 2016: Finance Minister Arun Jaitley will present the Union Budget 2016 on Monday, February 29 and the income tax paying public is on tenterhooks about what is in store for it. This is the third budget of the PM Narendra Modi-led NDA government and expectations are running high. Here are the top 4 points that FM Arun Jaitley may target that would be of extreme interest to the common man:
1. Budget 2016: Basic exemption for individual tax payers may increase
In light of inflation, Budget 2016 is expected to provide some relief by increasing the basic income tax exemption limit from Rs 2.5 lakhs to Rs 3 lakhs. This will give more disposable income in the hands of the individuals and thereby increasing the buying power. In the current economy it is important to increase demand of goods which can increase only by giving more disposable income to individuals.
2. Budget 2016: TDS payment on fixed deposits may be reduced
In view of Easwar committee’s recommendations, Finance minister may consider rationalizing TDS rates in this Union Budget 2016. Currently, TDS is applicable at 10% on interest from fixed deposits above Rs 10,000. For majority for tax payers, average tax rate after considering tax slabs is below 10% and thus resulting in refund. Reduction of TDS rates would reduce the administrative burden of collecting taxes earlier and then processing the refunds.
3. Budget 2016: Time limit of 3 years may increase to 5 years for claiming interest benefit on self-occupied house
Reduction for interest payment is available when possession of property is obtained within 3 years from the end of financial year in which capital is borrowed. Mostly builders delay the project and the individual is required to pick the cost as he gets a benefit of only Rs 30,000 as against Rs 2,00,000. As most of the projects generally take more than 3 years to complete, the FM may consider rationalization this provision and increasing the period of 3 years to 5 years.
4. Budget 2016: Reintroduction of tax benefit on infrastructure bonds
In wake of the required investments in infrastructure sector, it is expected that FM may reintroduction a tax benefit on investment in infrastructure bonds like the erstwhile section 80CCF. The limit could be set to Rs 50,000 which will result in tax saving of Rs 15,000 for a person in the 30% tax bracket. Reintroduction of this will help in mobilising long-term savings, improving India’s saving rate and boost infrastructural development in India.
(Author is Partner, KPMG)