The coming Union budget, which comes amid a global economic slowdown, is keenly awaited since it could give fresh direction to the economy
The coming Union budget, which comes amid a global economic slowdown, is keenly awaited since it could give fresh direction to the economy, business and markets. It is also expected that Finance Minister, Arun Jaitley, would announce taxation and other measures that could direct impact your personal finances.
Here is what Karvy expects the Finance Minister to do to better your finances.
Personal Taxation – Higher slabs may be proposed
To stimulate consumption in the economy, Karvy expects the budget to propose the following tax slabs:
Other taxation measure expected are:
–Tax-exempted savings limit under section 80C may be hiked to Rs 2.5 lakh from Rs 1.5 lakh at present.
–Standard deductions for salaried employees may be re-introduced to boost consumption
–Deduction of interest on housing loans may be hiked to at least Rs 3 lakh from the existing Rs 2 lakh. Similarly, principal loan repayment limit may be hiked to Rs 3 lakh from Rs 1 lakh at present.
–A depreciation allowance for salaried tax-payers may be introduced in line with professionals. Deduction of depreciation is allowed for professionals under the head ‘Business and Profession’. However, there is no such corresponding tax benefit to the salaried employees when they add assets. Though the assets get depreciated when owned by an employee, tax laws do not recognise this.
–To help salaried employees, leave encashment exemption limit may be raised to Rs 10 lakh. The current limit of Rs 3 lakh was notified by the CBDT way back in 1998 and needs to be raised substantially.
–Keeping into account the current day reality, monetary limits under HRA, transport allowance and children education shall be re-fixed.
Make National Pension Scheme (NPS) fully tax exempt:
The tax laws provide for a deduction of upto Rs 50,000 on contribution to the National Pension Scheme. NPS is unique in a sense that the investor has discretion over the type of investments (debt, equity or hybrid). However, the NPS is structured as an Exempt Exempt Tax (EET) scheme meaning that while deductions (or exemptions) are provided at the time of making the investment and when returns are earned on the investment, there is taxation when the corpus is encashed. The government could consider the option of making NPS as Exempt-Exempt-Exempt (EEE) to make it more popular among salaried employees and create wider partcipation.
Review Gold Bond scheme and Gold Monetisation scheme
The government had launched gold bond scheme and gold monetisation scheme to turn idle gold holdings of citizens into productive use in October 2015. These schemes haven’t been able to attract large number of investors. These schemes may be reviewed and changes included to attract more investors.