Finance minister Arun Jaitley will present his fifth budget on February 1 and most-asked question before finance bill tabled in parliament is Will the Budget bring down taxes? In the previous Budget, nearly everybody had expected that the finance minister will offer significant tax relief to the middle class to make their life easier. However, though the Budget did reduce the average taxpayer’s tax burden, it also took away some benefits. The cap on the deduction of home loan interest was a major shock for those with houses put out on rent.
As the finance bill we have some few suggestions which should be a part of finance bill 2018 which will make life easier for common taxpayers, investors and consumers.
1) Changes in Income Tax Slabs for Individuals:
Considering the steep rise in cost of living due to inflation, it is suggested that basic limit for exemption and other income slabs should be enhanced to give benefit to low income group.
The Government should make the following changes in the income tax slabs limits,
Upto rs 3,50,000 – exempted
3,50,000 to 5,00,000 – 10%
5,00,000 to 10,00,000 – 20%
Above 10,00,000 – 30%
These will reduce the tax burden of most of the middle class individuals, Lower income tax would mean more disposable income which in turn would lead to higher spending.
If these slabs would follow tax burden will reduce to a greater extent, for example if an individual have an income of rs 3,50,000 he need not to pay any tax, where as if current slabs follow he need to pay a tax of rs 10,000.
2) Abolish dividend distribution tax :
The dividend distribution tax (DDT) discourages companies from paying dividends, which dampens investor confidence.
3) Bring back standard deduction for salaried class :
A flat standard deduction percentage can be fixed for the salaried class, thereby restoring equity between them and other taxpayers.
4) Offer tax relief to senior citizens :
There should be no tax for senior citizen. Falling interest rates have hurt senior citizens who may not have the risk appetite for equity oriented instruments.
5) Reduce GST on insurance products:
GST on insurance should be reduce as tax from 15% to 18% has made insurance products costlier. Health insurance and life insurance should be completely exempt from tax.
6) Increase deduction limit under section 80C:
The individual taxpayers would undoubtedly benefit immensely if the deduction limit of rs 1,50,000 increases. An additional deduction of INR 50,000 over and above the existing limit would beneficial and such benefits would be two-fold in terms of exemption and income.
7) Change in the home loan exemption:
There is a limit of deduction of Rs 2 lakhs that is available to a person who uses the house for his own residence. This limit should be increased, to partly compensate for the increased interest costs.
Likewise, due to high loan amounts the benefit on principal repayment for home loan taken for residential purpose, which qualifies for deduction under Section 80C of rs 1,50,000 with other eligible items, largely went waste due to overcrowding of this section by various other items like life insurance premium, tuition fee, Provident Fund, etc.
So there should either a separate limit for principal repayment of home loan, or enhancement of the existing limit of Rs 1.5 lakhs.
Besides these changes there should be other changes as well which will be beneficial for the taxpayers and reduce their burden as cost of living is increasing day by day.