Personal tax: what the common man wants

India's Budget for more than a billion people is a mammoth task, combined with massive expectations from the Aam Aadmi. Our government has widely promoted concepts like 'Make-in-India' and 'Digital India' to encourage Indian industries, entrepreneurship among Indians, innovative technological growth and in a way that may increase employment in India, which are positive indicators for improvement in the economy at a macro level.

The middle class has more expectations of 'achhe din'. With a little bit of impatience creeping in as to why no impact is visible at the micro level, the expectations from the Budget are to have a blockbuster impact on aam aadmi in spite of limited fiscal space. There is a question mark on the face of the aam aadmi as to while there is a slump in crude oil prices, there is no significant reduction in petroleum prices.

While aam aadmi are happy to hear advertisements of various income earning schemes rolled out recently like Gold Monetisation scheme and Gold Bond scheme, is there any possibility to save money? Rising costs of fuel and food essentials also end up taking a toll on the pockets of the common man.

While the finance ministry's positive efforts for simplification of the Income Tax law and administration of Income Tax are evident from formation of Income Tax Simplification committee headed by Justice R.V. Easwar, aam aadmi may have more expectations like lower tax rates, higher basic exemption limits and standard salary deduction so that they can save money.

A few asks of the common man in terms of income tax in the forthcoming Budget are listed below:

1.    Basic exemption limit: Considering the steep rise in cost of living due to inflation, it is expected that this basic exemption limit may be increased to at least Rs 5,00,000. Further, the highest tax rate should be reduced to 25 per cent from 30 per cent to align it with tax rates for domestic companies.

2.    Standard salary deduction: Self-employed individuals have always enjoyed favourable tax treatment as they are able to claim deductions pertaining to business expenses. Due to the ever-increasing inflation and reduced purchasing power, salaried individuals have little scope to save for the future. Similar relief should be allowed to salaried individuals by re-introducing standard deduction, which was scrapped many years ago.

3.    Interest on housing loan: The current limit stands at Rs 2,00,000. Given the steep increase in real estate prices, purchase of property poses a big challenge for middle-class taxpayers. Considering this, first-time buyers who buy a house for shelter, should be given full interest deduction. Alternatively, repayment of housing loan may be excluded from 80C and be separately provided under Chapter VIA deductions.

4.    Other exemptions from salary: Other reliefs could be in the form of increase in exemption limits towards meal coupons, medical reimbursements, and education and hostel allowances. The exemption limits need to be re-aligned keeping in mind the manifold increase in costs over the years. For example, medical exemption of Rs 15,000 per year is minuscule when on an average the middle class taxpayer spends around Rs 50,000 as medical cost. Since mediclaim deductions were increased last year owing to increased medical costs, the common man will expect streamlining in other similar exemptions as well.

5.    Leave travel concession: Leave travel concession should also cover foreign travel given the increasing popularity of travel to foreign countries.

6.    Leave salary: There could be an escalation in leave salary exemption limit from the current limit of Rs 3 lakh.

7.    Others: Some new schemes could be introduced under the ambit of Section 80C and Section 80G in order to promote Swachh Bharat, Make in India and Digital India movements. While announcements of reducing complexities in tax compliance and refunds are made, they still need to see the light of day. The Budget is expected to announce some respite on faster processing of tax returns and quicker issue of refunds.

Here's hoping the aam aadmi's pukar is considered in the forthcoming budget!

(The author is Partner - People Advisory Services, EY India. Rupali S. Ashar, senior tax professional, EY also contributed to the article. Views expressed are their own.)