Some allowances and exemptions have not been considered by successive Finance Ministers in the Union Budget for several years now. Though last year Finance Minister Arun Jaitley raised the travel allowance exemption limit and also interest on home loans paid limit and the exemption limit under Sec 80C.
1) Tax exemption limit
The basic tax exemption limit was not hiked last year, even though there were large scale expectations that it would. With crude oil prices falling, the government has saved tremendously on subsidies. It is hoped that they would pass on some benefits through a hike in basic exemption limit from Rs 2.5 lakhs to at least Rs 5 lakhs.
2) Medical reimbursement allowance
The total medical reimbursement allowance is placed at Rs 15,000 annually. Now, this is hardly sufficient, especially if you have elderly dependent parents. A simple check for a family of 4 can cost significant amounts. If we add scans and check-ups for elderly, there is no way your medical bills would not go above Rs 15,000. Even for chronic ailments that require regular medicines the amount would not be sufficient.
3) Transport Allowance
The transport allowance of just Rs 1600 every month is far too less. Cities have expanded rapidly and those staying away from the workplace, would not be able to manage transportation costs with Rs 1600. It is extremely doubtful that the Union Budget 2016 would hike these rates, because Union Budget 2015, saw a small increment in these rates.
4) Sec 80C Allowance
Individuals are currently entitled to Sec 80C benefits of Rs 1.5 lakhs per annum. This includes investments in ELSS, PPF, Ulips, Insurance Premium paid etc. Though it is reasonable at Rs 1.5 lakhs, the government needs to encourage savings. Only when Sec 80C benefits are enhanced can the government encourage savings through various tax savings instruments
Like Transport Allowance, even this limit is unlikely to be hiked as Sec 80C benefits were enhanced from Rs 1 lakh to Rs 1.5 lakhs in last year's Union Budget.
5) Education Allowance
This allowance define any sense of logic. Education allowance is exempted from income Tax to the tune of Rs 100 per month per child and for a maximum of 2 children.
How can one even think of educating a child with Rs 100 per month. This has to enhanced and a sensible allowance made applicable.
It would be nice, if the Finance Minister Arun Jaitley, strives to ensure that the middle class benefits from the Union Budget 2016. More savings in the hands of investors could boost consumption and in turn, boost government income.