A day to go before Union Minister Piyush Goyal presents the interim Budget for the fiscal year 2019-20 which happens to be the last budget under the Narendra Modi government before the General Elections due between April and May this year. Public expectation, therefore, is high that Interim Finance Minister Piyush Goyal is likely to deliver a speech full of all the razzmatazz associated with Budgets-sops, new schemes, tax changes. The middle class, therefore, is waiting with bated breath.
Take a look at what's on the common man's wish list for February 1.
Increasing in basic tax exemption limit to Rs 3 lakh: Salaried class may hope for a surge in the existing basic exemption limit from Rs 2.5 Lakh to Rs 3 lakh if not Rs 5 lakh, and many predict that Goyal will deliver this on February 1. The government may increase the existing basic exemption to Rs 3 lakh for individuals less than 60 years of age, Rs 3.5 lakh for senior citizens (i.e. 60 years or more but less than 80 years) and Rs 5.5 lakh for very senior citizens (i.e. 80 years or more).
Rise in Section 80C deduction limit: Given that Budget 2019 is the current regime's last one ahead of the general elections in summer, speculation is rife that government may increase deduction limit under Section 80C from Rs 1.5 lakh to Rs 2 lakh, given the rising cost of living and inflation. This will leave more disposable income with the individual, thereby encouraging them to channelise long-term savings into capital markets.
Making housing more affordable: Given the rise in the cost of borrowing of a property and surge in property prices, the current deduction limit of interest paid on home loan by home buyers (i.e. Rs 2 lakh a year) is too low to cover the amount of interest paid. Hence, the government should consider increasing this limit from Rs 2 lakh to atleast Rs 3 lakh, if not to Rs 5 lakh in the Union Budget so that the deduction is justified. This will see the taxable income of home buyers coming down. Similarly, in respect of let out property, the current limit for set-off of house property loss against other heads of income in the same year, should be enhanced from Rs 2 lakh to Rs 3 lakh.
Creating more jobs: With India's unemployment rate hitting a 45-year-high of 6.1 per cent in 2017-18, according to a National Sample Survey Office's (NSSO's) periodic labour force survey (PLFS), it is now onus on the Modi government to fulfil its electoral promises by creating new jobs. It's a worrying picture, especially for a government that came to power promising to create 1 crore jobs after the UPA's reign of "jobless growth".
Reduction in Tax burden: In the face of rising inflation, that increases cost of living, and uncertainty in the job market, which is making it difficult for common man to meet his day-to-day expenses. They expect government to reduce tax burden, be it in the form of change in tax slabs or cut in the present tax rates.
Revising limits for tax-free reimbursements: To further help salaried employees, government must hike monetary limits under HRA/transport allowance and children education. Given the rising costs of healthcare, a more pressing need is to revise limits on medical reimbursements.
However, there are fiscal challenges for government given that raising the basic exemption by just Rs 10,000 is estimated to lead to a tax loss of about Rs 2,000 crore. Rating agency Moody's expects the fiscal deficit to reach 3.4% of GDP in the year ending March 2019, higher than the government's budgeted target. It also recently sounded a note of caution that the policy measures announced by the government recently could increase the risk of fiscal slippage beyond the current budget.
Edited by Chitranjan Kumar