Union Budget 2020: The countdown to Union Budget 2020 has started with the arrival of the New Year today. Finance Minister Nirmala Sitharaman is expected to encourage household savings and announce several measures to boost the economy. The Government may also consider doubling the tax benefit on National Pension System (NPS) contributions from Rs 50,000 to Rs 1 lakh.

Rachit Chawla, Founder and CEO, Finway told FE Online, “Tax benefit under the NPS should be doubled from current Rs 50,000 to Rs 1 lakh and the government should extend the facility of the tax-free contribution of 14 per cent by the central government to its employees under the NPS to all categories of subscribers.”

Earlier, the PHD Chamber of Commerce had demanded the government to allow all NPS schemes to invest in ‘BBB’ rated bonds.

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On the income tax front, expectations are high about making income up to Rs 5 lakh completely tax-free and also bring income up to Rs 10 lakh in the 10 per cent slab.

“The chances are that there will be lower tax rates on income, which will be good news for the middle-class taxpayers. Expectations are that there will be the tax of 10 per cent for the people with annual income between Rs 2.5- Rs 10 lakh, individuals earning between Rs 10-20 lakh may get to pay tax at the rate of 20 per cent,” said Chawla.

This will be a big relief for people who can think of than investing the extra money in financially sound investment schemes, which in turn will help the economy to grow, Chawla added.

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Boost consumption

Meanwhile, PHD Chamber president DK Aggarwal said that in the upcoming budget, the focus of the government must be on refuelling the consumption demand with a significant reduction in the direct taxes. He said reforms in direct taxation are need of the hour with remarkable rationalization of tax rates in the forthcoming budget

“We suggest no personal income tax applicable up to the income of Rs 5 lakhs for the individuals and income tax slabs should be rationalised to 10% for people earning up to Rs 10 lakh per year, 20% for those with incomes of over Rs 10 lakh and up to Rs 20 lakh, 30% for income over Rs 20 lakhs and up to Rs 2 crore and 35% for individuals earning more than Rs 2 crore,” said Aggarwal.

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“The increase in the personal disposable income will propel savings and investments in the economy thereby refuelling demand in the coming times,” the industry body’s chief added.

The PHD Chamber has suggested that the government should also bring petroleum products under the ambit of GST to reduce the cascading impact of indirect taxation.