Union Budget 2020 Expectations for Common Man: With the Budget round the corner, the common man is eagerly awaiting fiscal recommendations by the government that would help in planning his tax matters efficiently.
Union Budget 2020 Expectations for Common Man: With the Budget 2020 round the corner, the common man would be eagerly awaiting fiscal recommendations by the government that would help in planning his tax matters efficiently in the coming year. With higher cost of living and rising prices, there is high expectation by individuals that the government would take adequate measures to increase their disposable incomes so as to meet their consumption requirements as well as help plan for future savings.
Some of the ways through which the government can fulfil the objectives of a common man are:
Rationalisation of tax slabs
In its 2017 Budget, the government had brought down the tax rate from 10 per cent to 5 per cent on income in the slab of Rs 2.5 lakh to Rs 5 lakh. Keeping in view the cost of living trend in the economy, a common man would benefit if the tax slab rates are also revised. The government could consider increasing the existing basic income exemption limit from Rs 2.5 lakh to Rs 5 lakh for all individual taxpayers, thus leading to a reduced tax outflow of Rs 12,500.
Enhancing the investment limit under Section 80C
Besides the above, the current overall deduction limit of Rs 1.5 lakh under Section 80C is quite low and needs a revisit. Section 80C covers a wide range of tax saving instruments such as life insurance premium, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, tuition fees, principal repayment of housing loan etc.
With the present deduction limit restricted to Rs 1.5 lakh and with the option of too many investments choices under Section 80C, individuals feel hampered in making any further investments. The government should look at increasing the deduction limit to Rs 2.5 lakh as it would help people reduce their tax outflow in the range of Rs 5,000 – Rs 30,000. This is another important avenue for a common man to increase his net take home and will encourage savings.
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Increasing the investment limit under Section 80D
Personal health has gained utmost importance for an individual. With substantial increase in the cost of health care, the government may consider increasing the investment limit in respect of payment towards health insurance premium, from the existing Rs 25,000 to Rs 35,000 for non-senior citizens.
In addition, the government could consider introducing a separate deduction (not linked to Section 80D) for actual medical expenses incurred by an individual. This shall also increase the personal disposable income of the individual.
Removal of restriction of set-off of loss from house property of Rs 2 lakh
House property is an important asset in an individual’s portfolio. Due to high property prices, an individual typically finances the property through bank loans. The individual can access tax relief by setting-off the interest cost against income from house property. The existing set-off limit is restricted to Rs 2 lakh only. Enhancement of this limit will reduce the tax outflow for an individual as well as boost investment in real estate.
The above measures will contribute towards achieving the government’s twin objective of boosting demand and consumption.
(By Poorva Prakash, Senior Director; Tarun Garg, Senior Manager; and Nidhi Kumar, Deputy Manager, with Deloitte Haskins and Sells LLP