Budget 2020: More relief to individual taxpayers, bigger tax sops for home buyers needed

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Updated: January 31, 2020 10:39 PM

Budget 2020 Expectations for Taxpayers: In an unprecedented move, FM Sitharaman had recently incentivized the corporates by slashing the tax rate. Now it is time to give some relief to the salaried class and individual taxpayers too.

budget 2020, Budget 2020 Expectations for Taxpayers, home buyers, common man, income tax relief, Hike in basic exemption limit, Section 80C deduction limitBudget 2020 Expectations for Taxpayers: The prescribed limit for deduction under Section 80C for various specified investments/ expenditure, which is currently pegged at Rs 1.5 lakh, may be considered to be enhanced to at least Rs 3 lakh.

Budget 2020 Expectations for Taxpayers: The Budget Day has finally arrived, and with this, individual taxpayers are hoping for budget announcements that will help reduce their tax burden. Their expectations get belied in the last few budgets as except giving some sops to small taxpayers, not much was done for them. However, they are now hopeful that in her second budget, Finance Minister Nirmala Sitharaman will surely do something for them. In fact, in an unprecedented move, FM Sitharaman had recently incentivized the corporates by slashing the tax rate. Now it is time to give some relief to the salaried class and individual taxpayers too.

Here are some of the expectations of the common man from the Budget:

1. Hike in basic exemption limit

The existing income slabs and tax rates have remained constant for the past few years. With the objective of enhancing the net disposable income and to spur consumption of goods and services, the basic exemption limit can be enhanced from Rs 2.5 lakh to Rs 5 lakh. This would also need to be assessed basis the potential number of taxpayers who may fall out of the mandatory tax return filing requirement.

2. Hike in Section 80C deduction limit

The prescribed limit for deduction under Section 80C for various specified investments/ expenditure, which is currently pegged at Rs 1.5 lakh, may be considered to be enhanced to at least Rs 3 lakh to accord more headroom for various investments/expenditures covered therein. “Alternatively, a separate deduction may be introduced (in addition to proposed enhanced limit) for certain high value transactions such as children tuition fee, principal repayment of housing loan (to boost realty sector), etc,” says Parizad Sirwalla, Partner and Head, Global Mobility Services-Tax, KPMG in India.

3. Increase in threshold limits of several allowances

A salaried class individual is allowed to claim exemptions for several allowances up to certain threshold limits. These threshold limits are too meagre in today’s scenario as they have not been revised for more than a decade. “For instance, Children-Education Allowance is exempt up to Rs 100 per month and this limit was revised from Rs 50 to Rs 100 in the year 1997. It is the need of the hour, therefore, that the FM increases the threshold limits of various allowances,” says Naveen Wadhwa, DGM, Taxmann.

Watch: Budget 2020: Your income tax burden may come down – Top 5 Expectations

4. Reshuffling of the tax slabs

Besides an increase in the taxable limit, the tax slab rates are also expected to change. From the current level of 5%, 20% and 30% slabs, many expect the slab to be 10% for incomes between Rs 5 lakh and Rs 10 lakh, 20% for incomes between Rs 10 lakh and Rs 15 lakh, and 30% for higher levels. This would give the higher middle class individuals a much-needed tax relief.

5. Changes in other sections of Chapter VI A

The other Sections under Chapter VI A are also expected to undergo a change where the tax-free limits would increase. “The limit of exemption under Section 80TTA is expected to increase to Rs 20,000 from the current Rs 10,000. Moreover, interest earned on fixed deposit schemes might also be allowed as a deduction under the increased limit. Similarly, the allowed time to claim deduction on interest payment on education loans is expected to increase to 15-20 years to promote education,” says CA Abhishek Soni, Founder, tax2win.in.

6. Reverting to tax-exempt regime on LTCG gains

To boost investor confidence and incentivize infusion of further capital into the economy, the government may evaluate a move back to the tax exempt regime on Long Term Capital Gains earned from transfer of equity shares of a company or a unit of equity-oriented mutual funds on which securities transaction tax has been paid at the time of acquisition, and correspondingly increase the period of classification of long term to 24 months from the current period of 12 months.

7. Bigger tax sops for home buyers

The Modi government wants to provide Housing for All by 2022. However, keeping in view the current status of real estate and give a boost to the buyer sentiment, a lot of things are required to be done.

“To reignite the momentum in the real estate sector and give some relief to home buyers, the government may consider a few measures such as enhancing the standard deduction of 30% of Net Annual Value to 50%, enhancing current limit of deduction for interest payable on housing loan on self-occupied properties to Rs 4 lakh p.a. from Rs 2 lakh p.a., moderation of limit of Rs 2 lakh for set-off of loss from house property against any other head of income, separate deduction for pre-construction period interest, among others,” says Sirwalla.

8. Add more cities under metropolitan’s umbrella for HRA

An employee can claim exemptions for HRA if he pays rent for his residential accommodation. As of now, higher deductions are allowed if the employee is living in any of the four big metropolitan cities, i.e., Mumbai, Delhi, Kolkata and Chennai. Currently, the rental charges for a house in cities like Bengaluru or Hyderabad are equal to or higher than what a tenant in Delhi or Kolkata has to pay for an equivalent house.

“Many Indian cities have developed employment opportunities in the last two decades and, accordingly, rental charges have also increased manifold. Therefore, there is an urgent need of inclusion of many other cities in this category, such as Gurgaon, Bengaluru, Noida, Hyderabad, Pune, Jaipur, Ahmedabad, among others,” says Wadhwa.

It is clear, thus, that the Finance Minister will have a daunting task of managing the expectations of the common man vis-a-vis their fiscal balance sheet. However, what happens in the budget and whether the expectations of taxpayers are met or not, remains to be seen.

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