In the run up to Union Budget 2020, the common man is expecting finance minister Nirmala Sitharaman to announce some relief in the form of tax cuts, low-interest rates etc. Sitharaman during one of her earlier interviews had even hinted at giving relaxation to individuals in the form of tax cuts.
Here are the top 7 things the Aam Aadmi (common man) expects from the Modi govt:
1. Personal tax cut: The common man can expects the government to announce an increase in income tax exemption limit from existing Rs 2.5 lakh to Rs 5 lakh, that means a tax rate revision to 10% for individuals with taxable income over Rs 5 lakh and up to Rs 10 lakh. Similarly, a 20% tax rate revision for individuals earning over Rs 10 lakh and up to Rs 20 lakh and 30% for income above Rs 20 lakh. Meanwhile, there is also the expectation that the government will lower the highest tax slab rate from the current 30% to 25%, i.e., increase the corresponding limit from Rs 10 lakh to Rs 20 lakh. This relief will leave more (disposable) income in the hands of the people thereby leading to more demand for products and services, which will eventually lead to more production and churn in economic activity. This announcement is long overdue and is number on common man's wish list.
FULL COVERAGE:Union Budget 2020
2. Controlled consumer inflation: Another way in which the government can help the common man is by ensuring that inflation doesn't rise beyond a level. A 7.5% rate of consumer price inflation (CPI) is a very high rate of inflation largely because of the high prices of the vegetables and fruits in the markets. If the government can ensure the prices stay within limits, that would be a huge incentive for the common man.
3. Increased tax benefits on housing schemes: Housing is a critical need. The government has provided tax benefits on affordable housing in the past too. In the last budget, FM Sitharaman announced a Rs 1.5 lakh tax exemption to affordable houses bought under Rs 45 lakh. It is expected that this exemption limit could be raised to Rs 75 lakh this time because an individual cannot buy an affordable house under Rs 45 lakh in large metros especially in Delhi and Mumbai.
4. Low GST on consumer durables and FMCG products: The other major expectation of the common man and the middle class is that the prices of items of daily use should be brought down to make them affordable, especially consumer durables and some FMCG products. There is also a big expectation that GST rates on some of these items would be rationalised and brought down to aid consumption.
5. Low-interest rates: Although this doesn't relate directly to the budget, but if the government can ensure that the interest rates are brought down for the common man, it will be a major boost to consumption in the economy. Interest rates are still high particularly those of private sector banks and the entire repo rate reduction by the Reserve Bank of India (RBI) has still not been passed by the banks to the consumer as well as to the industry. About 1% of repo rate still remains untransferred to the consumer as far as bringing down the rates are concerned
6. Increase in Section 80C deduction limit: The common man also expects FM Sitharaman to increase the deduction limit under Section 8C of the Income-Tax Act, 1961. The current cap stands at Rs 1.5 lakh and doesn't leave much room for the taxpayers to broaden their investment portfolio. The expectation is that this limit (of Rs 1.5 lakh) should be increased to at least Rs 2.5 lakh in order to boost investment in several tax-saving schemes such as personal provident fund (PPF), fixed deposits, home loan repayment, insurance etc. This will leave more disposable income in the hands of individuals, thereby encouraging them to channelise their long-term savings into the capital markets.
7. Raise tax deduction limit on health insurance premium: People need a higher insurance cover on account of increasing healthcare costs. Hence, the common man expects FM Sitharaman to increase the deduction limit for medical insurance premium under Section 80D to at least Rs 50,000 from Rs 25,000 for self and family as well as for senior citizens dependent parents to a minimum Rs 75,000 from Rs 50,000.