After the bold and historic decision of demonetization, expectations from the forthcoming budget, to be presented on February 1, have gone up particularly in relation to income tax. Many citizens have gone through tough liquidity position and they have accepted the harsh move in anticipation of tax reliefs in the next budget.
Although the actual budget proposals may be quite different from the expectations, but giving an overview of what people want from the budget may help the government while taking budget decisions mainly related to taxation policies.
“On the whole, some reliefs may be announced, but these reliefs will be much lower than what the middle-class income tax payers are hoping for,” says Anil Chopra, Group CEO & Director, Bajaj Capital.
You may also watch:
Change in Tax Slab
We have already seen that due to demonetisation, banks have recorded massive capital inflows, which may impact the upcoming budget on a positive note. With PM Modi focusing more on the low-earning segment, it is becoming quite obvious that they can get a good relief in the new taxation regime.
“The minimum exemption limit is expected to be increased from Rs 2.5 lakh to Rs. 3 lakh or even Rs. 3.5 lakh. There may be no change in the 30% tax bracket, which starts from an annual taxable income level of Rs. 10 lakh. Even PM hinted in his speech on the evening of 31st Dec that the total number of tax payers in the 30% tax bracket are only 25 lakh and the actual number may be much higher,” says Chopra.
You may also watch:
Raise in Deductions
All investments are mainly covered under section 80C of the I-T Act. Currently the most-focused products in the market for tax saving are ELSS and NPS. It is being expected that the deduction limit may get raised to a certain level so that the people can increase their tax savings to a higher level.
“Another expectation is for an increase in deduction limit u/s 80C from Rs. 1.5 lakh to Rs. 2 lakh. In order to boost equity market, this additional deduction may be attributed to investment in ELSS schemes only,” says Chopra.
The more you save for your retirement goal, the better inflows you will get at the time of taking retirement. “Similarly, in order to grow the pension sector, deduction limit u/s 80CCD(2) towards contribution to NPS may get enhanced from Rs. 50000 to Rs. 1 lakh,” says Chopra.