Budget 2011: 'Aam aadmi' wants tax reforms

With finance minister Pranab Mukherjee all set to table the Union Budget 2011 on Monday, all eyes are on how he does a balancing act by maintaining the growth momentum and keeping the aam aadmi happy at the same time.

The middle class is hoping to see a progress regarding the proposals of the new taxes code, which envisages raising the first slab of income tax. Also, they are hoping that the price of domestic LPG remains untouched.

With fiscal deficit already on the higher side, many financial experts in the city feel that the finance minister may restrain from implementing populist ideas.

“With fiscal deficit on the higher side, there is hardly any scope for big experiments. But the middle class will be hoping for the income tax’s first slab to be raised from Rs1.60 lakh to Rs2 lakh. This will help the common man immensely and also raise the permissible deduction under Section 80C & 80 CCF (by way of life insurance premium, contribution to PPF, NSCs, etc) from Rs1.20 lakh to Rs1.50 lakh,” said Janak Shah, director of a wealth management and brokerage firm.

With elections round the corner in many states, experts feel that Mukherjee would have to please the common man.

“Reforms in taxable income, direct and indirect tax front are expected from the budget to keep the common man happy. With the assembly election scheduled in many states, more funds are expected to be allotted for the schemes under the national rural employment guarantee act (Nrega),” Shah said.

Bharat Phatak, director of another wealth management firm, said the common man is also expecting a deduction on interest on housing loans from Rs1.50 lakh to Rs1.80 lakh.

“How the government accepts the challenge to control the deficit and inflation at the same time will be watched with interest. Firm proposals on the direct tax code, goods & services tax and divestment programme will be important. It is possible that a cut in the indirect taxes on fuel may be considered to soften the impact of high global prices,” he said.

Chartered accountant Rahul Mirasdar said with uncontrolled rise in prices of food and other necessary items, increasing taxes would reduce the purchasing power. “Relief is expected by way of some concessions in direct taxes as these are the taxes which go directly from the pocket. Increase in exemption limit for various allowances for salaried class - such as transport allowance, children education allowance, reimbursement of medical expenses are expected by the middle class,” he said.

Mirasdar said apart from the relief direct taxes, the middle class also expects rationalisation in the indirect taxes such as - VAT, excise, customs, service tax.

“These indirect taxes have the direct impact on the economy and the inflation. Some of the expectations are control over petroleum prices, service tax on housing to be removed and speeding up the implementation of goods and services tax,” he said.