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Rediff.com  » Getahead » Vote: 5 expectations from Budget 2017-18

Vote: 5 expectations from Budget 2017-18

January 10, 2017 11:59 IST

Which one of these expectations do you think will actually materialise, come February 1?

Illustration: Dominic Xavier/Rediff.com

Vote: 5 expectations from Budget 2017-18

As the common man grapples with cash crunch on a day-to-day basis, the euphoria around ‘achhe din’ has all but died down. Demonetisation has been a rude shock for the diligent taxpayer. The 50-day period has already elapsed and no one can be sure whether life will be back to normal, cash normal.

Many taxpayers are expecting tax relief in the upcoming budget, some as a prize for enduring hardship during this period.

This financial year is likely to be a bumper tax collection year for the government, given collections from IDS as well as expected receipts from PMGKY. In this scenario, it makes a lot of economic as well political sense to use this budget to dole out tax sops for the common man.

1. Raising tax benefit under section 80C

A maximum of Rs 1.5 lakh can be claimed under section 80C and this limit has not changed since financial year 2014-15. As savings accounts are flush with funds, the government can use this opportunity to raise this limit to help collect funds for development and growth. This can be done by enhancing investment limit of PPF to Rs 2 lakh and bring 80C limit to Rs 2 lakh.

2. Raising minimum exempt income threshold limit

The minimum exemption limit has been Rs 2.5 lakh since FY 2014-15. Tax rates have also remained the same.

With the rebate allowed under section 87A, those with income up to Rs 3 lakh, do not have to pay any tax. However, with the rising cost of living this limit of minimum exemption or rebate of section 87A should be raised.

This will help ensure those earning up to Rs 4 lakh don’t have to bear the burden of tax.

3. Removing time limit for construction of property to avail home loan tax benefits

Tax laws allow deduction on interest on home loan of Rs 2 lakh per financial year, if construction of property is completed within 5 years. While the time limit for completion of construction was raised from 3 years to 5 years in Budget 2016-17, this is still not enough for buyers who have suffered delays by builders in handing over projects.

The tax department must consider doing away with any time limit, at least for first time buyers.

4. Raising the medical reimbursements limit

At Rs 15,000 annual reimbursement limit is too less to take care of a family’s routine medical expenses. Especially those with small children may find themselves exceeding this limit often.

With rising air pollution and associated ailments, the government must consider either increasing this limit or adding another reimbursement so taxpayers can buy pollution masks or afford air purifiers.

5. Clarity on NPS tier II withdrawals

The government announced tax benefits of Rs 50,000 on investment made in NPS Tier I account in the last budget.

Tier II account is a voluntary investment account. Having a Tier I account is a pre-requisite to opening a Tier II account. While there are tax benefits and withdrawal restrictions on Tier I, there are no such restrictions on investments made in Tier II accounts.

The government must clarify how withdrawals from Tier II account should be taxed. Currently, there is no notification from the government or the income tax department on this.

With some of the key states going in for elections in 2017, the government is likely to soften the tax burden on the common man.

So, which one of these expectations do you think will actually materialise, come February 1?

More Personal Finance stories here

Archit Gupta is Founder & CEO, ClearTax.com

Archit Gupta