The Union Budget 2017-18 is definitely unique even historic in many ways. It will be presented on an earlier date of 1st February this time rather of usual date of 1st March of every year, for starters. With the Budget 2017 just a couple of weeks away, there are expectations that the government will take some measures to help the taxpayers, especially the salaried class tax payers, who has rallied behind the government’s decision on demonetization.  The following are Top 10 expectations of salaried employees from Budget 2017 :

1. Modification in Income Tax Slabs and Rates:

Salaried individuals are always at a loss when it comes to tax rates since they end up paying high amount of taxes when they fall into high salary brackets. It is widely expected that there may be some upward revision in the income tax slabs to provide some relief to the common tax payers. The recent hint from Finance Minister – Arun Jaitley  has made people more optimistic that income tax slabs could further be increased, lowering the tax burden on taxpayers due to higher revenue being collected on account of cashless systems. Below is the expected and present Income Tax Slab Rates :

Present Income Tax Slab –

Taxable Income	Present Tax Rate
Less than Rs. 2.5 Lakhs	NIL
Rs. 2.5 Lakhs to Rs. 5 Lakhs	10% on taxable income exceeding Rs. 2.5 Lakhs
Rs. 5 Lakhs to Rs. 10 Lakhs	20% on taxable income exceeding Rs. 5 Lakhs
Rs. 10 Lakhs and above	30% on taxable income exceeding Rs. 10 Lakhs

 Expected Income Tax Slab –

Taxable Income	Present Tax Rate
Less than Rs. 4 lakhs	NIL
Rs. 4 Lakhs to Rs. 8 Lakhs	10% on taxable income exceeding Rs. 4 Lakhs
Rs. 8 Lakhs to Rs. 12 Lakhs	20% on taxable income exceeding Rs. 8 Lakhs
Rs. 12 Lakhs and above	30% on taxable income exceeding Rs. 12 Lakhs

 

It is also expected that a higher tax exemption slab and a reduction in tax rates may encourage more people to file taxes. Currently, only around 3% of India’s population file their taxes.

2.  Incentives for Digital Payments :

Government has already announced incentives for the digitized payments via debit/credit cards, mobile wallets etc. Service tax on payments for transactions upto Rs. 2000 through debit/credit cards have been removed, 0.75% discount has been announced for digital payments at petrol stations. With a vision to move towards a cashless economy, the government may announce further measures to encourage digital payments.

3.  Reduction in tax rates :

Salaried individuals end up paying high amount of taxes when they fall into high salary brackets. Currently anyone who earns more than Rs. 10 lakh per annum pays 30% tax on the amount exceeding Rs. 10 lakh. Thus, he has to forgo a large portion of his income in taxes. Hence, apart from revision in tax slabs, change in tax rates would always be a welcome move.

4. Increase in deduction for insurance premium paid:

At present specified limits for deduction under section 80D is Rs.25,000 for self, spouse and dependent children and an additional deduction of Rs. 25,000 and Rs. 30,000 is allowed for parents and senior citizen parents respectively. A deduction for preventive medical expenses is also available up to Rs. 5,000 spent as a part of the overall deduction.

However, a deduction for the actual expenses made in this regard on medical insurance premiums will be a welcome move since insurance premiums are very high, especially when it comes to parents. The cap of Rs. 5,000 on preventive health check-up expenses is also expected to be removed. It will help salaried individuals to save huge amounts in taxes.

 

5. Deduction for Rent paid under Section 80GG:

HRA is paid to employees to ease the burden of rent and there is an exemption available under the tax laws on HRA. Where HRA is not paid to the Employees, salaried individuals are allowed a deduction of Rs. 5,000 per month under Section 80GG. This deduction is expected to increase to at least Rs. 10,000 for metropolitan cities. This is because rent for a decent accommodation in metro cities has risen to this level and there is a need to increase the deduction so that salaried individuals get the benefit of this deduction.

 

6. Higher deduction for interest paid on housing loan:

With a substantial decline in the sales of the real estate sector, the Housing and real estate sector is facing a lot of hardships. The deduction for interest on housing loans is currently limited to Rs 2,00,000 p.a., however it is highly expected  from the Budget to raise the said deduction to Rs. 3,00,000 p.a. to provide relief to the tax payers. 

 

7. Increase in deduction for education and childcare expenses:

The maximum deduction for tuition fees upto maximum of two children is permitted to Rs 1.5 lakh under Section 80C per financial year. Tuition fees generally constitute a very small portion of the entire education fees for the year. Therefore, this deduction is expected to be extended to other portions of the fees as well.

 

8. Increase in deduction for Leave Travel Concession (LTC)

Presently, the economy class air fare for going to anywhere in India is tax exempt (twice in block of four years). However, this exemption is being allowed only for travel within India. It is therefore expected to grant tax exemption for economy class airfare for travel abroad also, so long these are within the overall airfare tax exemption conditions for travelling in India. 

Moreover, as per the current provisions, Leave Travel Concession/ Assistance is eligible for tax relief for two calendar years in a block of four calendar years. It is expected that the concept of calendar year should be replaced with Financial Year (April – March) in line with the other provisions of the Income Tax Law and further exemption should be made available in respect of at least one journey in each Financial Year.

 

9. Increase in deduction under Section 80C:

At present, the deduction under Section 80C allowed by the Government is Rs.1,50,000 per Financial Year. In a bid to boost savings, a corresponding increase in the limit is expected to be increased to Rs.2,00,000 per Financial Year.

 

10. More taxes on capital gains from stock investments:

There is widespread speculation that the Government, in Budget 2017, may introduce new rules for taxing capital gains from stock investments. Presently, there is no tax implication for gains made from stocks that have been held for a year. This minimum holding period of 1 year, may be raised to 2 or 3 years. There is also no limit on the tax-free capital gains, which might be capped at a high amount and taxed thereafter. It is also anticipated that the stocks sold within a year, taxed at 15% rate, may be taxed at 20% after the Budget announcement.

 

Conclusively, all eyes are set on the Union Budget 2017 announcement in the wake of the current economic scenario and our government’s efforts in ensuring a speedier implementation of schemes.

__________________________________________________________________________________________________________________________________________

Want to know more about this? Simply write to us at Taxmantra.com