Yes or No? A common man’s Budget 2019! Check this teaser on income tax returns (ITR) relief

The slogan ‘Ache Din Aane Wale Hain’ is well suited for describing a common man’s hopes. The NDA government's trending slogan emphasizes that ‘good days are coming’. This good day can very much be Budget 2019. Every year, common man keenly watches for new developments introduced by Budget that can help in their day-to-day lives. On February 01, 2019, when interim Budget 2019 was unveiled, then interim FM spoke of how much more money the government plans to bring into the hands of a citizen either by tax rebate or boosting investment platforms. To be honest, the interim budget was quite alluring! This time with a new Finance Minister Nirmala Sitharaman in the chair more good news is expected. 

A little teaser by Nirmala Sitharaman has shed some light during Economic Survey 2018-19 and 35th GST council meet about how things may pan out going forward. It will be interesting to know how does final Budget 2019 turns out!

When we say a common man’s budget, it can be in form tax reliefs, capital market investments, savings and lending. The interim Budget 2019 was a mix of all, as standard deduction limit was raised to Rs 50,000 from Rs 40,000. Tax rebate was sanctioned for Rs 5 lakh income category under section 87A. Also, income above Rs 6.5 lakh will not have to pay taxes, if they make investments in any government specified schemes. While the old is gone and some even implemented already, the new and final budget is yet believed to be a power pack and a major booster for common man. 

Archit Gupta, Founder & CEO ClearTax said, the government may consider to channelise additional funds in the hands of taxpayers. In simple words, let more money stay with taxpayers, by introducing various reliefs in regards to income tax. 

On personal tax front, Gupta believes there is a need for introduction of 10% tax rate due to a massive gap between 5% to 20% tax rate. If the government is not planning to reduce any taxes, then enhancing the income tax slab and salaries of a common man seems like a balanced option. 

Gupta points, looking at the present slab rates, one would notice a steep jump from 5% tax slab to the 20% slab for income above Rs 5 Lakh. There is a need to  rationalise the slabs for the 5% to 20% category to have stable and steady income tax rates. A 10% slab could be introduced for income in the range of Rs 5 Lakh to Rs 7.5 Lakh. And, the 20% slab could be fixed for the range of Rs 7.5 Lakh to Rs 15 Lakh.

Interestingly, a new prediction has also been made. This one can be a good news for those who are earning upto Rs 3 lakh.

Second best thing for common man could be hike in tax exemption limit specified under section 80C of the Income Tax Act. The last time, the government increased the section 80C limit was during 2014 election. Rs 1.5 lakh under section 80C, is given on investments or loans like - Public Provident Fund (PPF) account, employee’s share of PF contribution, National Saving Certificates (NSC), life insurance premium payment, children’s tuition fees, principal repayment of home loans, ULIPs, ELSS, home loan deposit, equity shares and much more. 

Gupta and many others believe, the government could enhance the section 80C limit. In Gupta's view, such would help citizens in overcoming the uncertainty in raising funds through the  equity market which has been fraught with volatility and liquidity crisis. 

Not only that, by increasing the tax deduction limit under section 80C, bank and government schemes become even more attractive against capital markets as the former already guarantees security and fixed interest rates. 

Further, considering home loans have become very attractive with RBI cutting policy repo rate by 25 basis points three times in a row, taking the rate at 5.75% which is at 9-year low - a little boost in Budget 2019 will work in favor of banks, real estate and home buyers. 

Navin Makhija, Managing Director, The Wadhwa Group said, "We are hoping that the upcoming budget will lay emphasis on housing sector. More tax sops and higher relief on the home loan rates will woo homebuyers and investors to buy property. This can help the sector recover from its liquidity woes to a large extent."

One way to make home loan furthermore appealing, can also be with enhancement of tax exemption limit in respect to interest paid on these loans. Gupta had said, “The rate cut would benefit the real estate sector too with the lowering of the housing loan interest rates. The government could look at enhancing the deduction allowed towards interest paid on housing loan from the present limit of Rs 2 Lakh to Rs 3 Lakh considering  the average price of a flat and ticket size of housing loans.”

At present, the Income Tax department, allows tax deduction of upto Rs 2 lakh or Rs 30,000 on housing loans under section 24(b) of IT Act. 

Additionally, even allowances can add further booster to a common man. Bhavin Turakhia, CEO, Zeta & Flock said, “For salaried employees, in the past few decades, we haven’t witnessed any increase in several allowances that are offered. For instance, the meal allowance is only Rs 50 per day; while children education allowance has a limit of just Rs 100 per month and the driver salary limit is only Rs 900 per month. It would be of great benefit for the salaried people employees if the Union Budget 2019 considers increasing the limit of such employee tax benefits.”

Wait there’s more! 

For making better use of gold in India, it is expected that the government could look into making gold deposit scheme mandatory for institutions in India. Same is predicted for even gold dematerialization. Expert at ICICI Securities in their note said, “Institutions need not hold physical gold. Banks can become instrumental to implement these measures aggressively. Monetisation essentially involves transferring household gold into the financial system. Once there, this gold can be recycled, thereby reducing imports of gold into India while continuing to satisfy demand.”

Finally, expert at HDFC Securities also said, “The finance ministry however is considering extending the holding period for short-term capital gains (STCG) tax on  listed securities from one year to three years, bringing equities on a par with some other asset classes in tax treatment. This proposal could be negative for markets  as the period of holding of shares to qualify for Long term capital gains would be 3 years vs the current 1 year.”

The above mentioned expectations will definitely make this Budget a common man’s. However, whether good or disappointing all will be known in just few minutes, as Budget 2019 will be announced Friday at around 11AM. One can surely expect some major surprise.