Budget 2019: Here's what taxpayers can expect

By Archit Gupta

The Union budget 2019 will be announced today and talks about it are getting louder. The budget affects the lives of individuals and the functioning of Hindu undivided families (HUFs) and businesses in many ways. There are many expectations and speculations about the budget in the minds of taxpayers.

Economic survey results for FY 2018-19 have been recently announced. An economic survey is a key process that leads to the framing of a union budget. The Ministry of Finance reviews the developments in the Indian economy over the previous financial years and prepares a document with a summary of the same. The document includes major development programmes, the prospects of the economy, and the policy initiatives. It also includes statistical data covering the performance of every sector in the Indian economy.

The latest survey report predicts a 7% growth in the financial year 2019-20. The report specified that the investment activity has been showing signs of growth given a background of the slow economic growth rate of 5.8% in the previous financial year. A growth rate of 8% is necessary per year to realise the $5 trillion economy by FY25. It also highlighted the increase in rural wage growth since mid-2018.

What are the expectations from Budget?

Here are a few expectations from various categories that have the potential to make a difference:

Income Tax for Salaried: Salaried individuals are expecting tax benefits via house rent allowance (HRA), which is a component under salary. The main cause for the expectation is the rising inflation in the country. The rent being paid, especially in metropolitan cities, has been rising out of proportion as compared to the HRA currently available. Therefore, it is expected that the government can include such non-metros under metro cities for the purpose of conferring HRA benefits to taxpayers.

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Tax Slab Changes: Currently, the basic tax exemption limit is set at Rs 2.5 lakh. However, low-income earners are expecting a rise in this limit to Rs.3 lakh. It is said that such a rise in the limit will stimulate the growth of the economy. Such a change will provide an additional tax benefit of Rs 2,500 per month to the taxpayers.

Tax Deductions under Section 80C and Section 80D: The tax deduction limit for expenditure and investments is currently at Rs.1.5 lakh under Section 80C. Taxpayers are expecting a rise of up to Rs.2 lakh on this limit. Also, the benefit of the medical insurance premium paid limit under Section 80D is currently at Rs.25,000. It is expected to increase the limit to Rs.30,000 as the medical insurance costs have gone up due to GST.

Parity among Salaried and Non-Salaried: Associated Chambers of Commerce and Industry of India (ASSOCHAM) states in its memorandum that it is necessary to bring-in parity between salaried and non-salaried taxpayers generally carrying business or profession as the former group has been paying huge taxes comparatively. It has suggested the inclusion of food and accommodation expenses under leave travel allowance exemption for the salaried class people.

Inheritance Tax/Estate Duty: In order to prevent the accumulation of wealth in the hands of a few, one of the most effective methods would be introducing inheritance tax/estate duty in India. Recently, there was a rumour about the government evaluating the pros and cons of introducing such a tax. Countries such as South Korea, Japan, UK, and the USA have already introduced inheritance tax on the accumulated savings of a deceased person.

Incentives to Labour-intensive Industries: A recent meeting of corporate leaders with the prime minister is said to have had a discussion on providing incentives to labour-intensive industries such as garments and engineering. This works as a measure to tackle unemployment of the country. Also, a proposal to provide concessions based on the number of employees was put in front of the PM. They also suggested reducing the employee’s share of EPFO and ESI.

These expectations may result in generating a lower revenue collection for the income tax department, in turn, hindering the government’s finances necessary to carry out developmental programmes. Therefore, the govt must find sources to boost its revenue. It may end up being a case of taking from one pocket and put into another. Ultimately, it’s a quest for balancing revenue generation and at the same time providing more money in the hands of the taxpayers. Further, a reformed direct tax code may consider rationalising taxation and benefits as per the current income tax laws together with the current cost of living for salaried taxpayers.

(The writer is Founder & CEO, ClearTax)