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2015

Five things to expect on tax front from Budget 2015

  • With its massive drubbing in the Delhi Assembly Elections, the BJP government is likely to attempt to keep the euphoria of the Modi wave alive with a please all Budget for the financial year 2015-16.
  • The budget will attempt to be mindful of retaining BJPs charm in its recent assembly electoral gains in states other than Delhi.
  • This budget will be largely focused on the Make in India campaign, but what the common man can expect from the Budget this year, let’s take a look –

Increase in Section 80C limit

  • Section 80C is the most popular way the government can encourage savings for the salaried.
  • Under this section certain investments and expenditures are allowed to be deducted from the total income.
  • And tax is payable on the Income less these deductions.
  • The Finance Minister had raised the Section 80C limit from Rs 1,00,000 to Rs 1,50,000 in the last budget.
  • However, India’s household savings have not been growing well enough to support the growth in the economy.
  • Additionally, Section 80C is now overcrowded with a plethora of investments and expenses which are allowed to be claimed under it.
  • So government may actually look raising the limit under this section.
  • This will have the twin benefit of more tax saved for the common man and higher savings to fuel the government’s growth plan.

Increase in tax benefits on home ownership

  • An owner of one house property which is self occupied can claim a deduction of Rs 2,00,000 on the interest for the loan taken for buying this property.
  • This limit was increased from Rs 1,50,000 in the last budget.
  • Increasing this limit further will help many prospective buyers take the plunge of buying a home as well as positively impact growth and investment in the housing sector.
  • Section 80EE that allowed an additional deduction of Rs 1,00,000 to first time home owners when certain conditions were met is not valid from financial year 2015-16.
  • Therefore it is highly likely the government will increase tax benefits on home loans and may bring in a special package for first time home owners.

Increase in minimum exemption limit and rejig of tax slabs

  • While in the last budget the Finance Minister raised the limit of minimum income which is exempt from tax from Rs 2,00,000 to Rs 2,50,000, a further increase in this exemption limit is likely.
  • Rising cost of living has made it challenging for people (especially those earning below Rs. 5,00,000) to meet regular expenses.
  • The Modi government is largely seen as pro big business, it will hopefully dole out benefits to the low income groups to gain popularity in this segment.
  • A relook at the income tax slabs which were left untouched in the last budget may also be attempted.

Scrapping of RGESS

  • Rajiv Gandhi Equity Savings Scheme was aimed at encouraging new retail investors to invest in the stock markets and help them save a maximum of Rs 25,000 under section 80CCG.
  • The BJP with its penchant to scrap anything related to the Gandhis and the poor response of this scheme are both good reasons for this deduction to get folded.
  • The scheme has been largely unpopular owing to its complex conditions and restrictions which did nothing to encourage retail investment in stock markets.
  • The government must attempt to give it a new avatar, simplifying the scheme and increasing the deduction to make it attractive for the retail investors.

Health Cess of 1%

  • As a nation our investments and expenditure on the health of our people is terribly low.
  • The poor are far removed from the provision of basic health and medical services.
  • The Health Ministry has been mulling a health cess of 1% just like the education cess of 2% and additional 1% cess on secondary and higher education which is already being charged on total income tax.
  • If the government provides tax benefits it may balance them by charging a health cess and show its commitment to improving basic health care for the poor and the underprivileged class.
  • The government has a tough task at hand balancing the expectations of the common man as well as focusing on its growth agenda.
  • Its direct tax collection targets have not been met and the pressure to deliver on its achhe din promise is setting in.
Financial Management