Just as a farmer gazes into the sky each year waiting for the onset of the monsoon that would lead to a bumper harvest, the common man has a lot of expectations each time the Finance Minister rises from his seat to present the Budget in Parliament.
It's still not clear whether the Budget P. Chidambaram unveils on February 28 would be a populist or a responsible one. But here's a look at the common man's wish list.
1. Tax exemption
With rising inflation hitting pockets hard, raising the tax exemption limit to Rs 300,000 from Rs 200,000 would leave more disposable income in the hands of taxpayers, particularly those in the lower income bracket.
2. Investment limit
The Income-Tax Act provides for a deduction of up to Rs 100,000 for certain investments/expenses such as retirement funds and insurance payments. In the absence of state-funded social security schemes, it is important for people to secure their post-retirement life. Increasing the limit to Rs 300,000 will encourage such investments. Further deductions like Section 80CCF (investing in infrastructure bonds) are also welcome as apart from encouraging savings, they also enable the government to direct the funds to priority sectors.
3. House loans
Every Indian dreams of owning a house. But while property prices are soaring, the interest deduction of Rs 150,000 on self-occupied property is too low. The limits should be increased to Rs 500,000.
The rising cost of medical care is hurting the common man. Raising the exemption limits for reimbursement of medical expense to Rs 75,000 from Rs 15,000 rupees should provide some succour. The deduction limit under section 80D for health insurance premiums should also be increased to Rs 50,000 from Rs 15,000 with more and more people opting for health insurance.
While conveyance and education expenses have surged, the exemption limits haven't kept pace. These limits should be increased in proportion to the amounts spent.
6. Standard deduction
Salaried employees incur various expenses for upgrading their skill sets. But they are not allowed deduction of any expenses incurred during employment. A standard deduction up to 30 per cent of salary with an upper limit of Rs 75,000 should be provided.
Employee Stock Ownership Plans (ESOPs) issued free of cost or at concessionary rates are taxed on the difference between fair market value and the amount actually paid by the employee. Levy of income tax on date of exercise creates a liability on the employee to pay tax on gains which are purely notional. Such taxation makes ESOPs less lucrative. Since ESOPs are a critical, motivational and retention tool for companies to retain talent, they should be taxable only on sale of shares.
Revenue authorities need to ensure taxpayers get refunds and tax credit on time. This will encourage more Indians to pay tax.
Jayant Jain is executive director and Khyati Shah is senior manager at PricewaterhouseCoopers Pvt. Ltd.