The country’s annual budget is one of the most important milestones in the financial calendar. Due to be presented tomorrow, it has been anticipated with hope and anxiety for the past few weeks. Tomorrow’s budget presentation is going to be different from the last four budgets on two accounts. Firstly, owing to Arun Jaitley’s recent surgery, Piyush Goyal, who has been appointed as the interim Finance Minister, will present the budget. Secondly, with general elections due later in the year, the norm is to present an interim or Vote-on-Account budget, with a full budget being presented after the elections. However, there have been reports that the government might just break the norm and present a full general budget. Goyal’s statement yesterday that ‘a budget is a budget’ has reportedly added fuel to fire.
While some experts believe that since an interim budget is to be presented, the government might not announce big-ticket reforms (like changing the tax structure); others expect the government to play to its strength and offer a variety of tax sops and populist schemes to woo as many voters as possible. Several sections of the society echo that the upcoming budget is expected to demonstrate a slew of tangible benefits for the middle class, the salaried class, farmers, small GST traders, SMEs and India Inc. Let us take a look at what could be some of the possible benefits for the salaried class in tomorrow’s budget:
Speculation is rife that the tax structure is set to undergo a significant transformation. Several experts have suggested that the current tax exemption limit of Rs. 2, 50,000 per annum could be raised up to Rs. 5, 00,000 per annum. The revision is expected to balance the sharp rise of the income tax rate of 5% to 20% for incomes between Rs. 5, 00,000 to Rs. 10, 00,000. The Confederation of Indian Industry (CII) has recommended lowering of the highest tax slab to 25%, as opposed to the current 30%.
The Federation of Indian Chambers of Commerce & Industry (FICCI) has, however, suggested that the highest rate (of 30%) should be applicable to only those earning more than Rs. 20, 00,000 per annum. The recent 10% reservation granted to economically weaker sections of the society, which set the threshold at Rs. 8, 00,000 per annum, has further strengthened the belief that the tax exemption limit will be increased and the tax slabs considerably restructured.
Benefits and Deductions
Sections 80C and 80D are expected to have their upper limits revised. While the deduction limit in 80C might go up from the current Rs. 1, 50,000 to Rs. 2, 00,000; the medical insurance premium is expected to go up to Rs. 40, 000 from the current Rs. 25, 000, alongside a reduction in the GST rates for health insurance premiums. The inclusion of debt and hybrid funds in section 80C is also on the cards, according to a few experts.
The standard deduction of Rs. 40, 000, which replaced the transport allowance and medical reimbursement in last year’s budget, is also likely to be increased or the scrapped allowances could be reinstated. Considering the rising prices of real estate, the tax deduction limit for housing loans (currently at Rs. 2, 00,000) is expected to go up as well.
With a current limit of Rs. 100 and Rs. 300 per month (for maximum 2 children), the child education allowance (CEA) and hostel allowance (HA) (which hasn’t been revised in the last 21 years) is expected to catch up with reality. It is important to note that last year, the seventh pay commission recommended the CEA and HA to be Rs. 2,250 and Rs. 6,750 per month respectively.
The House Rent Allowance (HRA) exemption of 50% of the salary is currently available to salaried employees in Delhi, Mumbai, Chennai and Kolkata only; the same is expected to be extended to the employees of Hyderabad, Bangalore, Gurgaon, and Pune as well, where the current rate is 40%. Additionally, there are expectations of an increase in the deduction amount of motor car allowance as well.
Women Employees and Job Market
Since the current tax code offers no special provisions to working women, there is an expectation to offer them tax sops and deductions in order to encourage their active participation in the workforce. While some are batting for a higher-than-normal tax exemption slab for women professionals, others are expecting deductions for expenses like day care enrolment, hiring domestic help and crèche facilities.
The government’s focus in the last few budgets has been to boost employment creation and impart the workforce with new-age and relevant skills. One can expect this sentiment to prominently feature in the budget as well; thus, anticipate policies and programs that improve job creation and put employment generation initiatives in the next gear. The economy will be given a massive push to sustain its growth and combat global challenges, which means that the business environment in the country will be positive and the workforce can expect a healthy job and hiring market in the near future.
The government has time and again lauded the working class for honestly paying taxes and contributing to the development of the nation. Thus, policies which benefit a large section of the salaried employees can naturally be expected. For now, we can only speculate as to what these benefits can be, but the wait isn’t that long, as the current government’s strategy and intended policies in its last budget will be available for closer inspection and scrutiny tomorrow.
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(Note: The above expectations and estimates have been collected from a variety of sources and expert opinions available in the public domain.)