With less than a month to go before the Budget is announced, there are wide speculations on what the new finance minister will announce for the common man. Tax collections in fiscal year 2018-19 have fallen short of the Budget expectations by 7.4% and ambitious healthcare plans, loan waivers to farmers and other subsidies promised by the government in the past few Budgets need to be funded. Thus, the focus of the finance minister would be on tax augmentation and increasing the tax payer base. However considering the wholehearted support the government has garnered from the elections, the common man would expect some relief. Thus, the finance minister would need to strike the right balance.
Interim Budget – Reliefs
In the interim Budget, relief to the lower income group has been provided by enhancing the tax rebate thereby ensuring that individuals with taxable income of up to ₹5 lakhs are not taxable. Increasing the standard deduction from ₹40,000 to ₹50,000 also provided an added respite. Further, increasing the tax withholding threshold limit for interest on bank deposits from ₹10,000 to ₹40,000 is relief to senior citizens who may not need to file tax returns to claim refund of taxes withheld if their income is below taxable limit.
One significant relief to property owners was the removal of the notional rent concept on the second home while computing property income. The interim Budget also extended a one-time opportunity to property owners to avail exemption under section 54 from capital gains tax, by permitting investment in two properties instead of one, provided the total capital gains is less than or equal to ₹2 crores.
Expectations from the Budget
While one recognises that giving any relief would be a challenge, assesses still continue to harbour reasonable expectations. Some of these are listed below -
a. No change to the slab rates – The general expectation is that there would be no tinkering with the no-tax slabs or rates. Similarly, the surcharge rates would not be changed.
b. Increased deduction under chapter VI-A – Tax payers however expect that there would be an overall increase in the rebate under section 80C and increase in the deduction under chapter VI – A. the current deduction is capped at ₹1,50,000 for 80C which may be increased to ₹300,000. Apart from this, the deductions for 80D and 80DDB could also be increased considering mounting medical costs.
Some taxpayers however, believe that with the interim Budget presented by the same government, there may not be any changes on the personal tax front.
As observed from the trend of the past few years, the thrust of the government is on digitisation, ease of doing business, online payments etc. A charge on cash withdrawals from banks beyond a certain annual limit can be expected, to push more spending through digital payments and reduce the circulation of cash in the market. One can hope that the limit is decided after considering all sections of society such as senior citizens, underprivileged, uneducated etc. Exclusions for certain types of industry should also be considered. Online settlement of cases, online submissions and resolution of disputes may be some areas where an improvement can be expected.
While the finance minister has an impossible task of pleasing all, one would expect that the minister will provide a reasonable number of sops to taxpayers to keep up the positive environment in the country. However strict action and heavier penal consequences can also be expected for tax defaulters and tax evaders.
Ms Aarti Rahul Raote is Partner, Deloitte Haskins and Sells LLP.