With less than 10 days to go for the Union Budget 2019 , speculation is rife on what it will entail for the salaried class. Finance Minister Arun Jaitley's past five budgets ushered in several changes in our salary structures and annual tax outgo.
For instance, in his first budget in 2014, he had not only raised the personal income tax exemption limit from Rs 2 lakh to Rs 2.5 lakh but also increased the investment limit under Section 80C - after a decade - by Rs 50,000. The next two budgets mostly tinkered with deduction limits while increasing the tax outgo of the super-rich. Then Budget 2017 halved the income tax rate for Rs 2.5-5 lakh slab to 5% while the last budget saw the reintroduction of standard deduction.
So what could be in store in Budget 2019, the last one by the Modi government ahead of the general elections? The wish list of the common man as well as industry chambers includes income tax sops, and the buzz is that the government is likely to give in. If fact, it is widely speculated that the coming budget will be a full budget, not an interim one or a vote-on-account as tradition dictates.
"We believe while the government will stay tethered to prudence, the balance will tilt in favour of populist measures designed to assuage restless voters who are currently sitting on the fence. We feel that the focus of the government in a populist budget would be to increase the disposable income in the hands of the citizens," said Anirudha Taparia, Executive Director, IIFL Wealth Management.
According to him, there is a very strong case for increasing the income tax exemption limit for taxpayers from the current Rs 2.5 lakh to Rs 5 lakh. "Some hints for the same can be gleaned from the recent ruling of the government to provide reservation for the economically weaker sections of the society, in which they have defined the weaker section to be any family whose household income in a year is less than Rs 8 lakh," he added.
The clamour for an increase in the maximum deduction limit under Section 80C is also getting louder. "The government must consider revising this limit, the revision must at least accommodate for inflation. Perhaps raising it to Rs 2 lakh from the present Rs 1.5 lakh would be impactful. Any such hikes will help individual taxpayers to invest in various tax saving avenues available under 80C and save on taxes," said Archit Gupta, Founder and CEO of Cleartax.
Going a step further, the industry chambers have recommended tinkering with tax slabs, too. The CII, in its pre-Budget recommendations, suggested lowering the highest personal income tax slab to 25% from 30% at present. On the other hand, FICCI's wishlist includes a revision in the tax slabs for the individual taxpayers with the top 30% rate applicable only beyond Rs 20 lakh annual income.
Another demand, albeit a less frequently voiced one, pertains to the standard deduction limit. Last February, Jaitley introduced standard deduction of Rs 40,000 but salaried taxpayers weren't impressed since he also scrapped transport allowance and medical reimbursement. So some experts want this amount to be increased to Rs 75,000.
There could also be some real estate sops in the offing, especially given the current government's focus on affordable housing. "We believe that this could take shape through an increase in the exemption limit for interest and principal on housing loans which would be in addition to the exemption given under 80C for principal repayment," said Taparia.
Last but not the least, the government recently tweaked the New Pension Scheme (NPS) - also known as National Pension Scheme - to not only hike up the Centre's contribution to the corpus from 10% to 14% but also introduce tax exemptions on withdrawals up to 60%. These new rules are likely to be introduced via Finance Act 2019 and, if passed, they will come into effect.