What are Union Budget 2019 expectations on personal taxes

In a year when the Budget is coming just ahead of the elections, it is normal to expect some relief on the personal taxation front. After all, if government wants to please the middle class with 10% reservation, it would be much simpler to just offer them tax benefits that will enhance their effective income.

Raise the base slab

This is an expectation in each and every budget. This time around, it could be done as a back-up in case the 10% reservation bill fails to stand up to legal scrutiny. Experts still argue that the base exemption limit of Rs.2.50 lakhs is too low and too unrealistic. While the markets are calling for it to be raised to Rs.5 lakh; at par with super senior citizens, the government may find a level somewhere in between.

Update Section 80C

The complaint on Section 80C is that the exemption limit has not kept pace with the changing income levels. Today if you add up the insurance premiums, PF and your child’s tuition fees, you are actually left with little exemption limit to cover other investments. The level has stagnated at Rs.1.50 lakhs for too long and needs to be increased to Rs.3.00 lakhs. Of course, the NPS can be clubbed into the overall limit thus making the effective expansion of the Section 80C limit at just Rs.1 lakh. That should be good to start with.

Exemption on interest

Currently, any interest earned during the year is only exempt up to Rs.10,000 per year. The higher limit of Rs.50,000 is only applicable to the senior citizens. To begin with, the government can extend the outer limit of Rs.50,000 to all tax payers and also do away with the TDS up to the limit to get rid of the unnecessary paper work. This will not only make bank FDs more popular but also more tax efficient.

Get real with Section 24

The Section 24 benefit pertains to interest paid on home loans. The limit is currently set at Rs.2 lakhs per annum. If you look at it realistically, this may not be sufficient to purchase a 2 BHK apartment in a Tier-2 city. Right away, the government could look to double the interest exemption limit to Rs.4 lakhs to make it in sync with the costs.

Rethink standard deduction

The standard deduction of Rs.40,000 per year was introduced in the last budget but reimbursement of medical expenses and transport were done away with. Ideally, the government can do away with medical and transport reimbursement but the standard deduction should at least be doubled to RS.80,000. Also, tax filing must be mandatory only if total income exceeds Rs.5 lakhs. That makes it easier!