Pre-Budget Expectation: Common man's perspective

By Rajat Mohan

The Finance Minister Nirmala Sitharaman’s maiden budget in July 2019, saw an implementation of the most awaited reform whereby the Corporate Income Tax rate was slashed bringing in relief for Indian companies.

With hints given by the Finance Minister regarding reliefs that the Budget may extend to the individual taxpayers, there is a budding expectation in the common man for certain measures which in addition to providing relief to the individual taxpayers will also help in augmenting the economy. India’s GDP growth is at its sixth year low which necessitates the adoption of certain bold long term as well as short term measures that would lead to the revival of the economy. The upcoming Budget is instrumental in bringing about these measures which are expected to be aimed at enhancing consumption expenditure and Investment Expenditure.

Consumption Expenditure can see a rise only when people are left with a larger chunk of disposable income. The enhancement of the basic exemption limit has been long-awaited which would a boost to the disposable income of the individuals. The present limit of Rs 250000 was last enhanced 5 years ago, because of which the middle-class taxpayer is now soaring with high expectations that the Finance Minister may increase the basic exemption limit to Rs 500000. Slashing the rate of tax in the highest Income tax slab from the present rate of 30 percent to 25 percent may also prove to be a boon in enhancing the disposable income of the individual.

With the increase in the disposable income in hand, the Indian common man is most likely to invest in areas that are directly proportional to his well-being viz. Education, Healthcare and Housing. Hence Investment avenues should be made more attractive which will increase investment expenditure eventually adding fuel to the growth of the economy. Deduction under section 80C alone covers up a lot of investment avenues like Life insurance, Tuition fees, PPF, NSC etc. The present limit of deduction under this section is Rs 150000 which is discouraging investors to invest beyond the limit. Limit of Rs 150000 should be suitably enhanced to boost investments.

Healthcare cost in the private sector has seen an exponential rise in the past few years making it more and more difficult for the common man to cope up with it. Considering the fact that the public healthcare services are deficient in catering to the masses Budget 2020 should consider enhancing the deduction towards medical expenses under section 80D from the existing amount of Rs 25000 to Rs 50000.

Real estate and Infrastructural development are considered to be the drivers of economic development. Budget 2020 should come up with solutions aimed at boosting the real estate sectors whereby lucrative tax benefits can be extended to individuals on home loans. Presently the deduction for repayment of home loan is available only under section 80C together with number of other investment avenues. Government shall look at a separate deduction benefit for repayment of housing loan which shall be in-line with the rising cost of real estate in Indian cities.

Initially, there was a separate bucket for investment in Infrastructure bonds which in addition to a deduction under section 80C, which was withdrawn by Budget 2012. Considering the importance of infrastructural development in the overall development of the economy, re-introduction of this deduction with an enhancement to Rs 50000 will not only be beneficial for the economy but will also prove to be a bonus for the individual taxpayer.

Budget 2018, imposed Long term capital gains tax on gains arising from sale of equity shares or equity oriented mutual funds which was previously out of the tax net. A rate of 10 percent was imposed on gains exceeding Rs 100000 without allowing the benefit of indexation. This limit needs to be enhanced to at least Rs 200000, as mutual funds have become quite popular in terms of investment options nowadays amongst taxpayers and imposition of Capital Gains tax has been burning a hole in the pocket of the common man.

Buying a car has now become a luxury for the common man. Vehicles attract the highest GST rate slab of 28 percent together with an additonal compensation cess. This coupled up with additional costs of registration, surcharge, road taxes etc. makes a person shed a hefty amount in terms of statutory payments before even purchasing the vehicle. The automobile industry contributing almost 7.5 percent to the country’s GDP and employing about 37 million people is now facing one of its worst sales slowdown. Bringing in reforms in the form of a reduction in GST rates for vehicles from 28 percent to 18 percent would give a boost to this sector and push up its demand. At the same time this move will come as an occasion to rejoice for the common man who would now be able to move one step forward to his dream of owning a vehicle.

Considering the current economic scenario, Budget 2020 should bring more and more reforms that are directed in enhancing the disposable income of individuals. This would give a boost to the consumption expenditure and investment expenditure which are considered to be the driving forces for overall economic acceleration. The current state of economic slowdown has rooted a ray of hope in the minds of all taxpayers for a positive change aimed at driving economic development. Now it would be interesting to see whether Budget 2020 proves to be favourable or disappointing for the common man.

(Author is a Partner at AMRG & Associates)