India’s interim budget and the expectations from the ‘common man’

The Union budget 2019, which will be an interim one, has triggered a lot of expectations among the common people. Looking back at the past five budgets by the Finance Minister Arun Jaitley, we find a lot of changes in the salary structures and the annual tax outgo.

For instance, the 2014 budget raised the personal income tax exemption limit from ₹2 lakh to ₹ 2.5 lakh. Also there was an increase in the investment limit under Section 80C after a decade by ₹ 50,000. The next two budgets that followed increased the tax outgo of super wealthy individuals. In 2017, income tax rate was halved for the ₹2.5 – ₹5 lakh slab. The last budget brought the standard deduction once more.

Tax sops still top the wish list of any common man, and the government is expected to give in this time to woo voters.

According to Anirudha Taparia, IIFL Wealth Management’s Executive Director, while the government will stick to prudence, the balance will tilt in favor of populist measures designed to assuage restless voters who are currently sitting on the fence.

What the common man could expect from budget 2019

There are strong hopes the individual taxpayer’s income tax exemption limit will be lifted from ₹2.5 lakhs to ₹5 Lakhs.

There are strong demands to lift up the maximum deduction limit under Section 80C. Talking on this, Founder and CEO of Cleartax Archit Gupta writes, "The government must consider revising this limit, the revision must at least accommodate for inflation. Perhaps raising to ₹2 lakh from the present ₹1.5 lakh would be impactful. Any such hikes will help individual taxpayers to invest in various tax saving avenues available under 80C and save on taxes."

Additionally, there is demand from industry chambers that the tax slabs will need some tinkering. As part of its pre-budget recommendations, the CII pressed for bringing down the highest personal income tax slab from the present 30% to 25%. FICCI has wished for a revision in the tax slab for the taxpayers suggesting that the 30% rate will be applied only for those making an income beyond ₹20 lakh per year.

Another issue in the past was standard deduction limit. Though the government had announced a standard deduction of ₹40,000, the salaried tax payers could not be happy as the transport allowances and medical treatments were scrapped. Hence some experts want it to be increased to ₹75,000.

There could also be some real estate sops in the form increase in the exemption limit for interest and principal on housing loans which would be in addition to the exemption given under 80C for principal repayment.

Recently, the New Pension Scheme (NPS), also called as the National Pension Scheme, was tweaked to bring an increase in the center’s contribution to the corpus fund to 14% from the present 10% and tax exemptions on withdrawals up to 60%. Once passed, the Finance Act 2019 will see them taking effect.