Although the Budget document outlines the government's planned revenue and expenditure, tax remains the most important aspect for the common man. Tax proposals are announced at the fag end of the Budget speech, keeping millions on tenterhooks. According to a survey by Assocham, a majority of salaried people want Finance Minister P. Chidambaram to raise the exemption limit on income-tax and increase deductions under various allowances so that they are left with more purchasing power.
- Exemption limit on income-tax: Over 89 per cent of the respondents said that the slab of tax free income has not moved up in line with real inflation. The current basic exemption limit of Rs 2 lakh should be increased to at least Rs 3 lakh, while the limit for women should go up to Rs 3.5 lakh. This will increase the purchasing power of individuals and stimulate demand.
- Medical re-imbursement limit: With increasing healthcare costs, the existing tax free limit of Rs 15,000 should be increased to Rs 50,000, 89 per cent of the respondents said.
- Transportation allowance: Currently, this is tax-free to the extent of Rs 800 per month. This limit was fixed more than a decade ago, and definitely needs to be revised upwards to at least Rs. 3,000 per month, given the rising commuting costs across the country, according to the survey.
- Interest on home loan: The deduction limit for payment of interest (on self-occupied property) has remained constant at Rs 1.5 lakh since 2001. Since then, property prices have gone through the roof, increasing the quantum of home loan. An increase in the exemption limit to Rs 2.5 lakh will be a welcome change, the survey found.
- Investments under Section 80C: This IT Act provides a deduction of Rs 1 lakh for certain investments. The provision helps people in making forced savings that helps them in the future. A common man expects this limit to be increased to Rs 2 lakh with a sub-limit of Rs 50,000 exclusively for insurance and pension.
- Infrastructure bonds: Over 82 per cent respondents favoured the restoration of infrastructure bonds, considering that the government needs massive funds for the development of the infrastructure sector and also the lock-in period should be restricted to five years.
- Pension: Over 71 per cent of the respondents demanded that the national pension system (NPS) be brought under the EEE (exempt-exempt-exempt) as against EET (exempt-exempt-tax) at present. This means that investors get a tax exemption at all the three stages of investment, appreciation and withdrawal.