The Finance Minister will have her work cut out to give stimuli to growth and development. Along with it, she will also have to balance the expectations of individuals on their tax outgo. The following is a crystal ball gaze of what could unfold in the first full-fledged Budget of the government’s new term.

The tax slab rate as pronounced in the interim Budget could be continued. The expectation is that the tax benefit granted separately to women assessees will be reinstated. As salaried individuals form a large base for tax collection, certain tax relief is expected to be extended specifically to this segment. One of the expectations is that the benefit for Leave Travel Allowance would be extended for overseas travel and hotel accommodation, and that the benefit would be provided every financial year.

For the children

In the age of nuclear families, daycare facilities for children have become a necessity. While many companies provide such facilities to their employees, the spend on such facilities by employers is considered a perquisite in the hands of the employees and hence attracts tax. The Budget is also expected to completely or partially exempt this benefit from tax.

Also where employees/individuals incur crèche expenses on their own, it could be allowed as a separate line item deduction. Similarly, the exemption of children’s education allowance and hostel education allowance should now be revised (it was last revised way back in 1997) keeping in mind today’s needs.

To encourage capital investments by taxpayers, the deduction on the interest on housing loans taken for acquisition/construction of a self-occupied house property can be increased to at least ₹2.5 lakh per annum.

In the previous full Budget, the Centre had introduced tax on long-term capital gains (LTCG) in excess of ₹1 lakh per annum on sale of listed equity shares and units of equity-oriented mutual funds. Previously, such gains were fully exempt from tax.

The government could consider increasing the base amount of LTCG that is is exempt from tax per financial year.

To induce small savings, the deduction allowed to normal tax payers for interest received from various bank deposits and savings banks can be enhanced to ₹25,000.

Deductions

Section 80C covers a pool of investments that are allowed as deductions. Given that the investments eligible for deduction are many, the amount of deduction should be enhanced from ₹1.5 lakh to ₹2.5 lakh per annum. Further, the monthly education expenses for children form a major portion of any household budget, and therefore, giving a separate deduction for such expenses to the individual tax payer would be a big relief. Currently, a deduction for the same is provided as part of Section 80C.

Lastly, the government has taken an initiative to improve governance through technology (such as e-assessment). It has also acknowledged that there are refunds pending to be issued for multiple years along with rectifications to be carried out. Although the Centre has, time and again, attempted to address these issues, the common man expects them to be processed at the maximum pace. The prolonged rectification procedure creates an agony in the minds of the taxpayers. It is expected that the issue would be addressed seriously in the upcoming Budget.

In general, it is not envisaged that there will be any tinkering in the tax slabs and rates for individuals. The feel-good factor could largely come from minor increases in exemptions/ allowances.

The writer is Tax Partner, People Advisory Services, EY India

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