10 Expectations from Union Budget 2016
On the 29th of February, India’s Finance Minister, Mr. Arun Jaitley, will present the budget for the nation. It is probably one of the most closely watched union budgets by the world since India has been looked at as a place of stability when the world is struggling to see growth. A recession is looming around the corner in the West and China is seeing a big slowdown, India is ‘a Knight in a shining armour’ for the world markets to survive the crisis. Besides this, the common man has a number of expectations for reduced financial burden. The following are the top 10 expectations from Union Budget 2016:
Increased basic exemption
The current basic tax exemption is INR 2.5 lakh, which is in our view quite low considering the increased cost of living. This can be raised by another INR 50,000 to 1 lakh in order to increase disposable income. This may in turn increase spending, which can only boost the economy in a deflationary environment.
80C Exemption
The current 80C exemption of INR 1.5 lakh has not been revised for a while now. This can easily inch up to INR 2 lakh to increase savings of the tax payer.
Introduction of new tax saving investment instruments
This is a rather neat way to boost the investment into the country’s development and decrease the burden on the tax payer. An Infrastructure bond or even a Digital India bond might be a good idea which can be used as a tax saving investment instrument, can be a great idea!
Housing Loan Exemptions
Tax saving on home loan interest currently is just INR 2 lakh. In cities like Mumbai, Delhi and Bangalore, house prices are in crores. The interest on home loans for some of us easily exceeds INR 2 lakh. It is important that the Finance Minister takes the soaring real estate prices into account to come up with a reasonable exemption limit.
Leave Travel Allowance(LTA)
Currently one cannot claim LTA every year. In fact you can claim only for 2 years in a block of 4 years. Also, one cannot claim LTA for travelling abroad which is unfair for people who dream for a vacation outside the country. The Finance Minister can consider advising relaxing this clause.
Conveyance/Transport Allowance
This is probably a shocking fact that the current monthly transport allowance exemption is just INR 1600/-. This is extremely low when compared to the travel expenses for the salaried class. This should be increased to at least INR 2500/- (100 INR per day for a 25 day working month) per month.
Getting the PSU banks back to health
There seems to be a growing fear that the PSU banks (both small and big) have worsened their asset quality. They are carrying large bad debts as certain Indian entrepreneurs (a liquor baron for instance) have fleeced the banks by not returning the borrowed money. The finance minister needs to propose ways to fix this and reduce the non-performing assets (NPA) that will help restore the banks to health.
Goods and Services Tax (GST)
The corporates seem to suggest that passing of a reasonable GST bill is of the highest importance to boost GDP growth. Some even say that this single bill can bring in a visible change in GDP numbers. The stock market would react positively to a GST bill passage. But the Opposition is in no mood to cooperate with the government to pass the bill. Let’s see how the current government will get this through.
Increased expenditure on digitizing rural India
Rural India is lagging behind on the path of development and innovation. Giving access to high quality, free internet is one of the priorities. They should also be digitally enabled in services like post offices, railway stations and banks. The finance minister should spend more on this front to bring all of us on the same path equally!
Fiscal Deficit Targets
Fiscal deficit is the deficit that happens when the country’s income is less than the overall borrowings. India needs to bring this to the 3.5% goal which has already been laid out in the past. Sale of some assets/divesting are some options that the government could look at to reduce the deficit burden. If we as country achieve the deficit targets we automatically become a stable haven for growth. Reducing government spending and subsidy burden can also be looked at.
Let us see how many of these expectations are fulfilled by Mr. Jaitley on the 29th.
Arjun Balakrishnan is an investment fanatic who loves writing about investment topics. He regularly writes at Investment Gyaan.