Populist or reform centric Budget?

Everybody wants to suggest something to the Finance Minister! But the question is how would he maintain a balance between a populist and reform centric decisions?

Expectations

The most common anticipation is to get an increase in tax the slab amount, and it's expected that an average of Rs 10000 to Rs 15000 will be increased in each category. However, people in their reviews asked the Finance Minister to consider inflation before putting exemption limits.

Second biggest exemption is under section 80C. The limit of exemption is still Rs 1,00,000 even after so many years, which is expected to be increased. Along with that, food concession, travel concession and educational expense deductions are also very low at present. Who can survive with Rs 100 as educational expenses? Even a small play house asks fees in figure of thousand for a kid. Similarly, travel concession of Rs 800 and food concession of Rs 50 are not sufficient in present time.

Owning a home today is a big thing for anyone. Exemption relief of Rs. 1.5 lakh are not enough compared to the growing cost of houses. House prices are so elevated that buying them on a loan means very high cost of interest. If we consider a normal price of home in a city, it would be at least Rs. 50 lakh and the cost of borrowing this amount will be around Rs. 4 to 5 lakh. This expense is inevitable for everyone, and cost is also not controllable. Most of the people are expecting an increase in this limit as everyone inevitably needs a home at high price. Very few people have savings available to buy a home without loan. Hence, the exemption amount should be increased.

Apart from these fundamental things, people also expect a relief in other requirements of life such as Leave Travel Concession, entertainment exemptions, etc. Many of us are looking for an increase in basic exemption limits while some people are looking for exemptions that allow them to freely enjoy their lives while working on a job. Working people also needs the enjoyment, but fear of losing salary due to this entertainment, doesn't allow them to take benefit of their leaves. Few concessions available are not much attractive, such as an LTC, which is available only inside the country while it doesn't matter whether leave is used for domestic trip or foreign trip.

Conclusion

There will definitely be some changes in indirect taxes also, which would have an impact on every person's pocket in the country. People don't look at these rates, but most of their income goes into buying livelihood and everything comes with an added tax that we don't look at. Whatever be the expectations of people, finance minister has to make it fair for all. It's tough job to manage the deficits of the country while considering inflation rates and taking decision in the benefit of each category of people in the country. Since this is the last budget before the election 2014, so people can expect lots of goodies this time. So this budget is expected to be more populist than a reform centric one. We can just hope for the best things to come out in this budget and have some nice gifts.

About the author:

Amit Sethi is an MBA (Fin) graduate and a Financial Consultant. He has spent 10 years in Equity research, Stock broking and Financial Consultancy Sector. He can be reached at [email protected]