Individuals were treated to a pleasant surprise this year when the finance minister rejigged the income-tax slabs and introduced the reverse mortgage scheme. These measures were alleged to be populist, but if that was the intent, I am sure a lot of that populism has eroded due to the soaring inflation and the overall economic turmoil.
The next budget will be presented sometime next year and it is difficult to predict under what economic scenario it will be done. The present slowdown is expected to continue for at least another 6-12 months. Since the government will increase its spending to keep the wheels of the economy turning, the fiscal deficit is expected to grow. Growth in tax revenues are expected to be sluggish and there will be pressure to mobilise more revenues. In such circumstances, the new government is unlikely to introduce any relief in personal taxation.
However, some measures might lift the sagging spirit of taxpayers and boost the economy.
Housing: With a crash in the real estate market, there is a renewed interest in developing affordable, low-cost housing. The government can make land available at a reasonable cost to developers and raise the amount of deduction that a person can claim towards interest payment against any self-occupied property. Easy access to housing loans, more tax breaks on interest payments and greater availability of affordable housing will benefit the people and also the real estate sector.
Insurance: Insurance density in India remains one of the lowest in the world. The government should consider a specific deduction for life insurance premium and not include it under Section 80C. The additional tax incentive may prompt more people to go for insurance, and give a fillip to the sector at the same time.
Standard deduction: The salaried taxpayer cannot deduct any expenses he may genuinely incur in his profession. With the companies struggling, the hike in salaries next year is expected to be minimal. And if inflation also rises, then some relief by way of standard deduction will be greatly welcomed.
Education: India's future lies in an educated workforce. Scholarships, or any other form of educational assistance, provided by the employer to his employees and family members should not be subject to fringe benefit tax or any other tax. This will encourage the companies to fund education expenses of their workforce. If the above measures are properly implemented, it will help our economy and millions of taxpayers.
Amitabh Singh is Partner, Ernst & Young
