FM Arun Jaitley may turn Santa for salaried class

Expectations from the Budget on the personal tax front are mixed on account of the impending 2019 general elections. 

Since Budget 2019 is also the last before the general elections, there are chances that there could be some measures to please the middle-class voters.

According to Kuldip Kumar, partner & leader, personal tax, PwC India, there could be a hike in the basic exemption limit (the limit beyond a person’s income is taxed).

“There are chances that the government will try to cheer the middle-class segment. Even in last year’s Budget the major changes were for senior citizens. The recent reduction of GST rates was targeted at businesses. The government could increase the basic exemption limit, which has not been changed since the last three years. Overall measures could be simple and straight forward ones that will affect more taxpayers,’’ Kumar said.

Increase in basic exemption limit from Rs 2.5 lakh to Rs 3 lakh, a higher basic exemption limit for women taxpayers to may be Rs 3.25 lakh and a hike in the limit for tax-saving investments under Section 80 C could be implemented in the Budget, he said.

However, according to Archit Gupta, CEO and founder, Clear Tax, more than allowing a higher exemption for women, a better idea would be to allow them deduction for expenses on day care or house help. An increase in the 80C investment limit of Rs 1.5 lakh to Rs 2 lakh is more likely since it has not been hiked since 2014-15. “This is due, given inflation and how crowded the basket has become. It definitely needs to be increased,’’ Gupta said.

Tinkering with tax rates is not expected since Budget 2019 would be an interim Budget, said Suresh Surana, founder, RSM Astute Consulting Group. But there could be an increase in the basic exemption limit to Rs 3 lakh, keeping in view the inflation and the fact for the past couple of years the limit has not been increased.

Since it is a vote on account, it is difficult to say what could be announced, said Homi Mistry, partner, Deloitte India. “Some populist measures are possible since it is an election year. But at the same time there may be no announcement that will impact tax revenues. Already, some concessions have been given for GST,’’ Mistry said.

Although standard deduction was increased last year to Rs 40,000, the tax exemption for conveyance and medical allowance was removed. Hence, the net relief for taxpayers worked out to only about Rs 5,800, which was low. This limit could be increased this year, giving relief for the salaried class, Mistry said.

With regard to tax filing, there have been some discussions about pre-populating tax forms and sending it to taxpayers. It is being practiced in some countries. If there is some announcement on this, it would help taxpayers, Mistry said.

Story so far

2018

• A health and education cess of 4% was introduced to replace the 2% primary education and 1% secondary and higher education cess
   
• Investment for specified bonds to save tax under section 54EC was limited to long-term capital gains from transfer of immovable property
   
• Standard deduction of Rs 40,000 was re-introduced for salaried class
   
• Senior citizens above 60 years, deduction on interest from FDs was increased to Rs 50k from Rs 10k
   
• Tax deduction limit on health insurance premium was raised from Rs 30,000 to Rs 50,000
   
• Transport allowance of Rs 1,600 a month and medical expenses reimbursement of Rs 15,000 per annum was withdrawn