With the 2019 Lok Sabha Elections fast approaching and the interim Budget 2019 being just a week away, expectations are high on what is in store in the Budget. The Finance Minister is expected to present the Finance Budget ahead of the 2019 Lok Sabha elections in the month of February 2019. There have already been significant changes in the taxation system such as e-assessments, early processing of tax refunds, introduction of standard deduction, etc. Therefore, this Budget is expected to contain further measures to simplify tax compliance and administration.
While the Finance Minister may wish to focus on progress and welfare related measures, the common man may expect the following from the upcoming Budget:
1.Increase in basic exemption limit from Rs 2.5 Lakh to Rs 3 Lakh : Salaried individuals may hope for a surge in the existing basic exemption limit from Rs 2.5 Lakh 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).
2.Increase in section 80C limit: Section 80C provides for deduction in respect of various payments/investments such as children tuition fees, housing loan repayment. However, with the increasing cost of living, the government may consider increasing the limit of this deduction from Rs 1.5 lakh to Rs 2 lakh. This will leave more disposable income with the individual, thereby increasing the purchasing power capacity.
3.Increase in the limit of standard deduction of Rs 40,000: Last year, the government introduced the standard deduction in lieu of conveyance allowance of Rs 19,200 and medical reimbursement of Rs 15,000. It is expected that the government should increase this limit to Rs 70,000 as the benefit of Rs 40,000 was a very nominal increase.
4.Exemption for expense incurred for leave travel: Currently, the law provides for exemption in respect of expenses incurred on travel within India (subject to other conditions) in respect of two journeys performed in a block of four calendar years. The government should consider providing such exemption in respect of expense incurred for each financial year as against only two in a block of four calendar years.
5.Loss from house property: With the increase in the cost of borrowing for owning a property and surging prices of property, the current limit of deduction (i.e. Rs 2 lakh) in respect of interest paid for purchase of self-occupied property is too low. Hence, the government should consider increasing this limit from Rs 2 lakh to Rs 3 lakh. 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.
6. Allowing Day care /Creche facilities expenditure: Currently, there is no provision under the Act to provide deduction in respect of expenditure incurred for day care/creche facilities by working /salaried couples with kids. It is seen that more and more Indian families are going nuclear where husband and wife both are working individuals. Consequently, today's working parents have to depend on good day care facilities to ensure adequate care of their kids while at work. The day care facilities are also expensive. To ensure that the working /salaried couples can easily depend on day care facilities and the expenses are not burdensome to them, deduction of the actual expenditure incurred by the individual or if the expenses are borne fully/partly by the employer, then the same should not be treated as perquisite in the hands of employees.
These tax reforms would work in congruence with existing reforms introduced by the government and will provide the much needed boost for growth through an effective tax system.
(Homi Mistry is Partner, Deloitte India; and Niji Arora is Senior Manager with Deloitte Haskins & Sells LLP)