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Budget 2020: Common man’s expectations on personal taxation

Budget 2020, union budget 2020, budget 2020 India, Budget 2020 expectations, Common man's expectations from Budget 2020, personal taxation, income tax, 80c limit, income tax slabs, LTA

Budget 2020 India: Finance Minister Nirmala Sitharaman will be presenting the Union Budget 2020 next month. The FM, during one of her recent interviews, hinted at providing relief to individuals in line with the tax cuts announced for corporates in September 2019. Hence, it is but obvious that the common man has high expectations from the upcoming Budget.

The key expectation is increasing the threshold limit for the minimum amount not chargeable to tax, from Rs 250,000 to Rs 500,000. The last such increase was made almost 5 years back when this was increased from Rs 200,000 to Rs 250,000 in the financial year 2014-15. Hence, such an increase is long overdue and tops the list of expectations the common man has from the Budget. Similarly, there is also the expectation that the highest tax slab rate may come down from 30 per cent to 25 per cent, with a corresponding increase in the limit from Rs 10 lakh to Rs 20 lakh. This should increase disposable income in the hands of the common man.

Deduction under Section 80C of the Income-Tax Act, 1961 (the Act) provides for various types of payments made by the taxpayer which are eligible for relief such as PPF, fixed deposits, housing loan repayment (principal portion), insurance, expenditure made towards tuition fees, etc. However, the limit under this section is very low. To boost such investments, expanding the limits for the purpose of 80C is the need of the hour. The limit of deduction under section 80C of the Act was last increased from Rs 100,000 to Rs 150,000 in the Budget of 2014. As such, the exemption limit should be enhanced to Rs 300,000, from the current limit of Rs 150,000.

To ensure affordability and accessibility to medical treatment for all class of patients and in view of the ever rising inflation levels, it is time that the deduction towards such expenditure under section 80D of the Act should be increased from the current Rs 25,000 to Rs 35,000.

The exemption on long-term capital gains from sale of equity and equity-oriented mutual funds also needs a relook. The expectations are that the current limit of exemption should be increased from Rs 100,000 to Rs 200,000.

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There is a list of allowances which need to be re-looked, of which Leave Travel Allowance (LTA) is one such allowance. With global travel now becoming affordable for even the common man, foreign travel should be considered by the government for providing the benefit of LTA. Further, restriction of the benefit, to two years, should be done away with and the benefit of LTA should be available annually.

Good infrastructure is key to the growth of the economy and therefore the authorities should re-look at reintroducing the deduction for investment in Infrastructure Bonds. This was earlier introduced in April 2011 with a maximum deduction of Rs 100,000 and discontinued a year later. Thus, such deduction should not only be reintroduced but the limit of Rs 100,000 should be enhanced to Rs 150,000, if not Rs 200,000.

Aspirations of the common man are soaring high following repeated announcements by the Hon'ble FM to provide relief to individual taxpayers. Hence, it is a matter of time whether expectations of the common man will be met or not in the upcoming Budget.

(By Divya Baweja, Partner, Deloitte India)