Budget 2019-Hopes of a common man

The 5^th of July is fast approaching and everyone is anxious about what it will bring with it. Former defence minister and the current finance minister Nirmala Sitharaman will release the current year’s budget on the 5^th and common man eagerly awaits some exemptions which will allow them some extra money in their pockets. Also since the current government has come back in full majority, it is all in their hands, to give exemptions and increase the fiscal deficit or to stick the fiscal regime and face the heat from common man. Nevertheless, like every year the common man does hope for some relief probably in the areas mentioned below.

Removal of Disparity in the House Rent Allowance (HRA) - As per the current provisions, employee staying in the 4 metropolitan cities of Delhi, Mumbai, Kolkata and Chennai can claim higher deduction for HRA. However going with the current trends, the rentals in other towns like Hyderabad, Bengaluru, Pune, Ahmedabad, Noida and Gurgaon are equally high, if not higher. And this is all down to the economic boom experienced in these cities, a lot riding on the success of the IT and ITES industry worth over $150 billion. This has resulted in huge movement of population to these cities in response to employment possibilities within the past few years. Keeping the demographic changes in mind, the government can consider offering a better HRA exemption to individuals staying in these cities also in view of excessive rent.

Revision in tax exemption limits - The basic exemption limit of Rs 2.5 lakhs has not been revised since 2014 much to the dissatisfaction of the individual tax payers.The present slab rates of 5% for incomes from 2.5 to 5 lakhs with a full rebate of tax paid if the incomes do not cross Rs 5 lakhs did provide some respite. However the next slab of 20% for incomes between 5 to 10 lakhs looks very steep and hasn’t gone down too well with the upcoming middle class. The government could keep in mind rationalising the slabs for this class of income earners and increase the basic exemption limit. This not only puts more money into the pockets of mid income earners, but almost certainly guarantees the uptick in the economic activity as this segment primarily believes in spending as well as saving. So the government can get 2 things done at the price of one.

Getting rid of Impractical allowances–The government not very long ago, did away with transport and medical allowances provided by the employer. It's time that the authorities also does a reality check on children education allowance and hostel allowance, that are meagre Rs 100 and Rs 300 a month, that have in no way been revised since it was created. The authorities can also recall granting an annual exemption for Leave Travel Allowance (LTA), instead of the current two exemptions in a block of four years to promote travel and recreation for the hardworking salaried class. By promoting the leave culture by giving these allowances, the government indirectly helps in creating a boom for economic activity and also goes a long way in people’s health and wellness.

Raising the limits on tax saving investments –Another area where the government can provide some relief is increasing the limit on the tax saving investments namely sec 80C. The restriction for deduction under Sec 80C for tax saving investments was last updated in 2014 to Rs 1.5 lakh and covers mostly debt instruments, it is hoped that this restriction can be raised to at atleast minimum Rs 2 lakh to encourage individual income earners to channelise maximum savings into investments, hence promoting economic boom in their own small way. This can be achieved by creating a new investment vehicle like done previously under Rajiv Gandhi Infrastructure schemes where the government could use these funds for infra projects and the common man enjoyed tax savings.

Deduction for home loan interest - The deduction for domestic loan interest was raised to Rs 2 lakh in 2014 considering this gives a great impetus of the government towards pushing the Housing for All mottos. And if the government wishes to continue to move towards this mission, the limit should be pushed further to atleast Rs 3 lakhs considering the prices of the houses are exorbitant these days. The famous Sabka Saath Sabka Vikas motto of our Prime Minister can find true reality if this deduction was relooked and made more reasonable in line with the inflation.

The common man anxiously awaits for a good news from the Finance Minister, this could be the right time for the government to thank its people by means of granting them with a few tax sops and the people benefit from the budget. With the economy facing a severe slowdown owing to global issues, the government should try to put more money in the hands of general public so that the economy activity is reignited. Though the experts believe that the Government may not be in the mood of giving sops, infact may look at ways and means to penalise tax evaders and black money hoarders. Therefore all eyes would be on 5^th of July 2019 to know what’s in store for rest of the year!