Expectation of Common Man, Middle Class from Budget 2019

India is getting ready for General Elections in April-May 2019 when the world’s largest democracy will select its leaders for the next 5 years. However, before that happens, the stage is all set for Union Budget 2019 which will be presented on 1^st February. Some years back, the Budget was presented on the last day of February, and hence, in the year of General Elections, a Vote on Account only was presented which worked as an Interim Budget and the complete Budget was presented by the New Govt. However, this year may see a complete budget as the Parliament has one extra month to pass it before the elections get announced.

Considering the recent State Elections results and the prevailing sense thereafter, the Budget is expected to be a populist one. As such, there is a lot of monetary relief that the common man expects from this Budget. Here are a few expectations of common man and middle class from Budget 2019:

1. Increase in the Basic Exemption Limit

As per the present Income Tax laws, an individual below 60 years of age is not required to pay any tax up to the income of Rs. 2.50 lakhs. This limit has not been revised since quite some time now and hence, it will be a fair expectation that the basic exemption limit is raised, giving relief to all the taxpayers.

2. Rationalisation of Income Tax Slabs

The Parliament has recently passed legislation to provide for reservation for Economically Weaker Sections (EWS) belonging to the upper caste with a ceiling of Rs. 8 lakh annual family income for availing the EWS reservation. It is expected that the income tax slabs will be suitably rationalised to minimise the tax impact on the Economically Weaker Sections i.e. incomes up to Rs. 8 lakhs. Any such change will reduce the tax burden on the common man, the vote bank the Govt. will like to target.

3. Increase in the Tax Saving Investments Options and Ceiling Limit

Section 80 C of the Income Tax Act, 1961 allows for certain payments/investments to be deducted from total income and eventually save tax on such amount, e.g. life insurance premiums, Equity Linked Savings Schemes (ELSS), 5-year tax saving Fixed Deposits, tuition fee of children etc. However, all such payments are allowed to be availed as a deduction only up to Rs. 1.50 lakhs every year. Just like the stagnation of Basic Exemption Limit, even this limit has not been revised for a few years. It is expected that such limit will be enhanced to inculcate the habit of saving in people.

Further, representations have also been made before the Finance Ministry that certain debt funds may also be made eligible under Section 80C, so that investors with conservative risk profile may also be inclined to invest in mutual funds and also save taxes.

4. Restoration of Medical Reimbursement Exemption

The Finance Act 2018 provided some relief to the Salaried employees by providing a standard deduction of Rs. 40,000 for any salary/pension income. However, in the process, it also took away the exemption in respect of transport allowance (up to Rs. 1,600 p.m.) and reimbursement towards medical expenses (up to Rs. 15,000). Thus, the relief for employees was not seen as a significant relief. Considering the rising medical expenses and Govt.’s focus on healthcare schemes including Ayushman Bharat, it is expected that the exemption towards medical expenses reimbursement may be reinstated with a higher ceiling limit. Further, incomes during special periods like maternity etc. may also be proposed to be made tax free.

5. Elimination of Long Term Capital Gains (LTCG) Tax on Equity Shares

The Govt. had introduced LTCG tax of 10% last year on the gains from the sale of equity shares held for more than 1 year. However, this acted as a dampener to the markets’ sentiment. With the equity markets giving single-digit returns for the year, the imposition of LTCG tax may not even meet the expected tax collection. The Govt. may consider eliminating the LTCG tax or Securities Transaction Tax (STT) and boost the investors’ sentiments in the equity markets.

6. Boosting Farmers’ Income

The recent State Elections may have made the political parties think that farm loan waivers can help to increase the vote share and eventually the number of seats. However, at the same time, such waivers tend to discourage the honest borrowers repaying their loans on time and disturb the credit discipline on a general basis. As such, the Govt. may introduce certain kind of performance/ production linked benefits or subsidies to farmers and aim at providing long term sustainable solution to the agricultural community by taking measures to boost their incomes.

Let’s hope that the budget fulfills most of our expectations and eventually reduce the overall tax burden on our pockets. Stay tuned with MoneyView Blog for the Highlights of Union Budget 2019.