The Union Budget 2017 is a few weeks away and experts have started to express their opinions. There have been quite a few rumours about changes in income tax rates and other government offered incentives after the demonetisation drive. Such rumours and anticipations are always generated from people’s expectations and the government usually listens to public opinion to the extent feasible. This is why we have compiled a list of top expectations from the Budget 2017 for your reference.
- Changes in Income Tax Slabs and Rates:
This is a major concern of every taxpayer in the country. The most common expectation is increasing the minimum tax exemption limit from Rs. 2.5 lakh to at least Rs. 3 to 3.5 lakh. Taxpayers and experts are also expecting some changes in income tax rates. Revisions to both of these factors (slab and rate) are expected to also encourage people to pay taxes thereby increasing the tax-paying percentage from the current 3% of the population.
The expectations for lowering of taxes have increased after the Finance Minister talked of the benefits of demonetisation in December. In his address, Mr. Arun Jaitley talked about changing the mindset regarding taxes. He had said that if tax rates are reduced then the prices for service and goods will become highly competitive and Indian companies will be better placed to compete with international players.
- Increasing the Benefits under Section 80C:
Currently, individuals can claim a maximum sum of Rs. 1.5 lakh under section 80C on investments but this limit can be increased up to Rs. 2 lakh. This is in addition to the Rs. 50,000 investment allowed under section 80CCD.
- Streamlined Tax Saving Instruments:
Governments often introduce new tax saving schemes every few years but often ignore to push reforms in existing schemes. It reflects badly on the older schemes such as FDs, insurance policies, and pension plans, which have now become less favoured as compared to ELSS, NSC, NPS, mutual funds, etc. Such schemes need to be updated so that they are more streamlined with newer tax saving instruments.
Not reforming the traditional tax saving instruments also affects the elderly population negatively as they are more comfortable with such investments and have parked the bulk of their money, if not all, in the old schemes due to lack of better options in the earlier days. Though such reforms will take some time to be implemented but they are needed for better social security.
- Exempted Pension Income:
This is one demand which has been raised by many over the years across media and other platforms. Some experts also talked about raising the exemption limit from Rs. 2.5 lakh to Rs. 3 lakh but no one exactly knows the precise outcome of the budget until D-day. Alternatively, there is another possibility that the Government may include schemes such as the EPF within the tax ambit as it is completely tax-free currently.
- More Home Loan Benefits:
If an individual starts property construction and completes it in a period of 5 years, then he or she is eligible for a tax deduction of Rs. 2 lakh on the interest on the home loan in a financial year. Such time limit of property construction is not appropriate for buyers as many have suffered delays by builders in completing projects. Though this limit was increased from 3 years to 5 in Budget 2016-17 but it has not proven sufficient to redress the loss suffered by buyers.
- Encouragement to Digital Payments:
The government has already announced some incentives on digital payments such as debit/credit card payments and payments through mobile wallets. With a vision of moving towards a cashless economy, there are chances that the government will provide some more rebates on digital payments.