With only a few days to go before Finance Minister Arun Jaitley presents the Budget for FY2018-19, the common man is busy wondering the benefits he may expect in what will be the last full Budget of the present incumbent government. The general feeling is that this may be a populist Budget, and so expectations are high among the common man, who represents the part of a mere 3%
of the 1.3 billion population that pays taxes. So what are the expectations of this segment of population? The following is the wish list of the common man:
Income Tax Exemption Limit
For the common man, like every year, this continues to be on the top of the wish list, and the question on his mind is whether the finance minister is going to raise the exemption limit. By how much? Will it be Rs 3 lakh? Will it be Rs 5 lakh? The FM may not increase it to Rs 5 lakh, as that would mean increasing the exemption limit by 100%. Do remember that an increase in exemption limit means revenue loss to the government. Let's hope that the FM gives some relief to the aam admi by increasing the exemption limit to at least Rs 3 lakh.
Tweaking of Tax slabs and rates
The second on the wish list is whether the FM tweaks the tax slabs and rates. In last year's Budget, the FM reduced the rate of tax from 10% to 5%, on the second slab of Rs 2.50 lakh to Rs 5 lakh, while keeping the other rates unchanged. The rate of 10% has disappeared just like the Rs 1,000 note after
demonetisation. So the common man hopes that the FM reduces the rate from 20% to 10% on incomes between Rs 5 lakh and Rs 10 lakh.
The implementation of GST widening of the tax base may compensate the revenue loss that the government may incur on account of all these changes.
Time to revisit Standard deduction
The salaried class incur various expenses on commuting to and from office, on medicines or doctor's consultation fees, phone calls etc., but cannot claim any deductions on these expenses, whereas a consultant or a self-employed person can claim a substantial amount as "Business Expenses".
Even companies claim many expenses as legitimate expenses and reduce profits. Though some benefits are available to the salaried class like transport allowance of Rs 1,600 per month (Rs 19,200 per year) and reimbursement of medical expenses of Rs 15,000 per year, these are not sufficient as they
have not kept pace with inflation.
Just to give an example, if an employee has to commute 20 km to office (40 km every day) he has to spend at least Rs 100 a day on the cheapest mode of transport. Similarly, medical expenses not related to hospitalisation like doctor's consultation, cost of injections and medicines have been going through the roof every year.
Clearly, an increase in these allowances and expenses can restore parity between the salaried class on the one hand, and self-employed and consultants on the other. Standard deduction was Rs 30,000 when it was abolished in FY2004-05, and if it is reintroduced, should be at least Rs 1 lakh, factoring in inflation.
Increase deduction under 80D
This section under I-T allows an assessee to claim a maximum deduction of Rs 25,000 on premium paid under a mediclaim policy. Hospital expenses have been going up exponentially every year in India, and all of us know that room rent in ordinary private hospitals of Rs 2,000 to Rs 3,000 per day, and a few days of hospitalisation either due to an accident or ailment can cost an individual a few lakhs of rupees. Let's hope that the FM increases the amount from the existing Rs 25,000.
Clarity on Bitcoins
After the astronomical and frenzied increase in prices during 2017, Bitcoins have caught the fancy of most people. The common question the common man is asking is the treatment of capital gains in Bitcoins. There is no clarity from the government on paying of taxes on capital gains. While there are huge risks investing in Bitcoins, the common man expects the FM to clear the confusion on taxing investments in Bitcoins.
Other concerns and expectations
There are also rumours that the period of holding in long-term capital gains in equity shares and equity mutual funds may be increased from the existing 12 months to 36 Months, to bring it on par with Debt MFs. The government is also mulling scrapping of Dividend Distribution Tax (DDT) and shift the incidence of tax from companies, to the hands of investors.
As the common man is going to be affected in both the cases, it is hoped that the government will maintain the status quo.
(The writer is a CFA and former banker, and is currently with Manipal Academy of Banking, Bengaluru)