In less than two weeks from now, the Union Budget 2018 would be unveiled. Expectations are running high and the government has to deliver some goodies. This is because this is the last full-fledged Union Budget before elections are held in 2019. Here are some of the expectations from the Union Budget by the Aam Admi.
Revising tax slabs
Currently, no tax is payable if the income of a person is below Rs 2.5 lakhs. The government may revise the same to Rs 3 lakhs. Tweaking the rates in the lowest tax slab tends to benefit those who do not earn that much.
It is unlikely that the government will revise the tax rate of 5 per cent, which is presently payable under this tax slab. If taxes are reduced it could propel growth as disposable income would be high. However, the government has to take cognizance of the fact that the fiscal deficit has also been slipping.
Increase in 80C limits
Presently there are various instruments which qualify for tax benefits under Sec 80C of the Income Tax Act. The amount presently has a limit of Rs 1.5 lakhs. The Budget could see the ceiling being raised by another Rs 50,000 to Rs 2 lakhs. If this happens and the limit is raised to Rs 2 lakhs, then the person in the highest tax bracket would save around Rs 16,667 every year, while those in the 20 per cent bracket would save Rs 10,000 each year. This is a highly possible event in the Union Budget.
Various reimbursements qualify for tax rebates. For example, if you produce medical bills worth Rs 15,000 they qualify for tax breaks. Transport allowance presently qualifies for a tax rebate of up to Rs 1,600 per month. The common man would like see some increments in the exemption limit in some of these areas to increase his disposable income.
No tax on interest income
Many individuals feel that if dividend income is tax free in the hands of investors upto Rs 10 lakhs, why not bank interest income.
Why are too asset classes being treated so differently? In fact, equities have also found favour in treatment of capital gains, when compared to other asset classes like gold and real estate. While long term in the case of gold and real estate is defined as a period of more than 3 years, for equity shares it is defined as one year.
No capital gains tax is payable on shares, if you sell at a profit after the holding period is more than one year. This favours equity as an asset class. This distinction must seriously be addressed in the Union Budget.