India Union Budget 2019: The Budget 2019 is to be presented today. Although industry experts are not expecting any major policy changes from this budget, but that is not the case with the common man.
Budget 2019: The Budget 2019 is to be presented today. Although industry experts are not expecting any major policy changes from this budget, but that is not the case with the common man. For, this being an election year, there are high hopes that the government may roll out some sops in the form of tax benefits etc for the common people and the salaried class. In fact, from changes in the income tax slab rates to increased home loan incentives, there are many expectations of the common man from this Union Budget. Here we are taking a look at some of them:
1. Increase 80C deduction limit to boost household savings rate
For many taxpayers, mandatory payouts like home loan principal repayment, life insurance premiums, tuition fee for children’s education, employer’s contribution to EPF and payment of stamp duty and registration fee incurred on purchase or construction of home property are much more than the maximum Rs 1.5 lakh deduction available under Section 80C. Hence, “there is little scope to encourage them for investing in long-term investments such as ELSS, ULIP, PPF, NPS, tax-saving fixed deposits, etc. With India’s household savings rate declining from over 23.6% in FY12 to about 16.3% by March FY17, doubling the Section 80C deduction limit to Rs 3 lakh will encourage India’s middle class to invest more in long-term financial assets and, thereby, enhance their financial security in the future,” says Naveen Kukreja, CEO & Co-founder, Paisabazaar.com.
2. Increase in income tax exemption threshold
Currently the income tax exemption limit for individuals (less than 60 years of age) is Rs 2.5 lakh, which a majority of people are expecting to get doubled to Rs 5 lakh in the Budget 2019 in view of the coming election. Even industry body CII has proposed doubling of the exemption limit from Rs 2.5 lakh to Rs 5 lakh to incentivize savings in the hands of taxpayers. Some tax experts, however, say that keeping in view a huge revenue loss to the government, this type of hike in the exemption limit seems unlikely. However, the exemption limit may be increased marginally by about Rs 50,000.
3. Change in income tax slab rates
Besides an increase in the Section 80C deduction limit, taxpayers are also looking for some changes in the income tax slab rates. In the Budget 2018, in fact, the finance minister didn’t give any relief in the income tax slabs or tax rates for individual taxpayers, although in 2017, the Modi government had reduced the tax rate to 5% in the lowest tax slab (Rs 2.5 lakh to Rs 5 lakh). The tax slabs, however, were left untouched. Keeping this in view, it is expected that this time the government may tinker with income tax slab rates also.
4. Remove LTCG tax on equities and equity mutual funds
Equity markets play a major role in the capital formation and overall economic development of the country. Hence, reintroducing the LTCG tax exemption on equities and equity mutual funds will go a long way in encouraging fresh retail investor inflows to the equity markets, thereby improving the equity penetration and improving the overall investor sentiment in the economy.
5. Allow separate deduction for term insurance
Term insurance plans can buy life cover of 10 to 15 times of one’s annual income at very low premiums. However, insurance is often confused as an investment product, leading many people to buy life insurance policies that provide inadequate life cover. To ensure India is not underinsured, with respect to at least life insurance, a separate section for term insurance beyond the Section 80C limit would incentivise people to buy pure term insurance policies and get adequate life cover in the process.
6. Increase home loan deduction limits
Home loan deductions are currently not in sync with the on-ground reality of property costs. In fact, Section 80C of the Income Tax Act is a smorgasbord of investment and insurance options. It currently also includes deductions for home loan principal payments. Currently, you can get deductions of Rs 1.5 lakh under 80C for principal repayment and Rs 2 lakh for home loan interest payments. This is woefully inadequate if you consider the reality of property prices in big cities. In Delhi, we have seen that the average home loan ticket size is Rs 29.3 lakh. In Mumbai, it’s higher at Rs 32.68 lakh. It skyrockets to Rs 39.20 lakh in Bangalore.
“This means that home loan repayment eats a massive chunk of the middle class household income. It leaves little scope for other essential investments such as life insurance and retirement planning. In most years of a home loan tenure, you may end up spending well above the Rs 1.5 lakh and Rs 2 lakh limits. Therefore, to strain the income of middle class income less, the government should consider either expanding the 80C and 24B limits, or moving home loan repayments into a new section that addresses the high costs of home ownership in big cities,” says Adhil Shetty, CEO, BankBazaar.com.
7. Increase in standard deduction
Finance Minister Arun Jaitley had in the Budget 2018 reintroduced the erstwhile standard deduction of Rs 40,000 for taxpayers. However, the benefit was not substantial as the deduction was given in lieu of transport allowance and medical expenses reimbursement, which earlier was Rs 19,200 and Rs 15,000, respectively, providing the net benefit of Rs 5,800 per annum only. It is, therefore, hoped that the amount of standard deduction will be doubled to Rs 80,000 in this budget.
8. Make housing more affordable
The Modi government has taken many steps to give a boost to affordable housing as well as make housing affordable for the common people. Its ‘Housing for All by 2022’ mission along Credit Linked Subsidy Scheme under PMAY is targeted towards this. Still, housing is still not affordable for a majority of people, especially in metro cities. Thus, more efforts need to be made in this regard so that even the common man could buy his own house.
9. Make NPS more attractive like PPF, EPF
The government has made many changes in the NPS rules recently to make the National Pension System (NSP) more attractive both for salaried people and investors. Still, it is not a simple product like PPF and EPF that everyone should opt for. Therefore, despite being a good product, a majority of people are still skeptical of investing in it. The FM should do something in this regard also.
10. Lower GST rate on health insurance premium
Currently health insurance falls under the 18% GST slab. If the GST rate is lowered from 18% to, say, 12% on the health insurance premium, then it will make health plans more affordable for the common man, and more and more people will get benefited.