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How the finance Minister can make the common man happy

Wednesday, 9 July 2014 - 6:10am IST | Agency: DNA

"Achche din aane wale hain" – was the slogan used to describe the change the Narendra Modi-led NDA government would bring after being elected. make in place would have post the election season.

The government is all set to present its first budget and as we get closer to the date, expectations from the common man increase manifold. The aftermath of the budget are felt by every section of the society; be it women, students, salaried persons, businessmen or senior citizens.

The finance minister has a difficult task on managing current resources with existing demands from all sections of society. Here are some key expectations from the budget.

Special incentives for people who invest in infrastructure and bonds are required, as the government treasury may get a lot of money from this avenue, and would serve a dual purpose of collecting funds for creating world class infrastructure and speeding up investment for economic growth.

There has to be a re-look at limits currently applicable for conveyance allowance to salaried class. With rising fuel costs and longer travel distances, the conveyance allowance exemption limit can be increased from the current value of Rs 800 per month (fixed in 1998) to at least Rs 2,000 per month. To bring salary earners at par with business income earners, it would be critical to put in place standard deduction from salary. This is the norm in many countries, in order to provide an exemption of expenses which have been incurred to earn such salary. Such standard deduction can be either a fixed amount, viz Rs 50,000 per annum or a percentage of net salary, in order to keep parity within salary earners.

To enhance long-term savings and investment, it is important to increase the deduction under Section 80C from current level of Rs 100,000 to at least Rs 300,000. Alternatively, considering that India does not have a specific social security system, contribution to Provident Fund may be kept out and provided as a separate deduction. Similarly, delinking education expenses/ tuition fees from such deduction and having a separate deduction for such expenses would be beneficial.

At present, India does not have a comprehensive public healthcare system as compared to other developed countries. Further, last few years have seen private healthcare becoming increasingly expensive.

Hence, the current exemption limit of Rs 15,000 per annum can be increased to at least Rs 50,000 per annum.

At present, deduction of mediclaim insurance premium is restricted to a limit of Rs 35,000 (Self/ family - Rs 15,000 and parents - Rs 20,000). Considering the current health care environment, this limit can be increased to Rs 50,000, with the twin purposes of tax incentive and healthcare coverage.

To propagate investment in real estate sector, the limits of interest paid on loan for self-occupied property can be re-visited. Currently, deduction for interest on loan taken for a self-occupied property, is limited to Rs 150,000 per annum (not including additional deduction of Rs 100,000 for first-time home buyers). Considering the increase in cost of borrowing, such limit can be increased to at least Rs 300,000 per annum.

The levy of Securities Transaction Tax (STT) on transfer of listed securities needs to be done away with, since it adds to the cost of the transaction and could deter the small investors from investing in the capital markets.

There should be a rationalisation of taxation thresholds like the government needs to assess the tax slabs/rates keeping in mind the international trends. Subject to the fiscal deficit situation, the government may consider raising the basic income threshold on which tax liability triggers (currently Rs 200,000 per annum) along with the income thresholds on which peak rate and surcharge trigger (Rs 10,00,000 per annum and Rs 1 crore per annum respectively).

The FM has a lot of challenges on his plate to come out trumps to meet expectations of society at large from the current budget.

The writer is executive director - tax & regulatory services, EY. Views are personal


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