Interim Budget 2019: Tax benefit expectations

A lot has been discussed on what budget 2019 should include and the additional benefits that could be introduced to make it pleasant to the common man. Currently, very few options are available to the salaried class for availing tax relief. As this budget is due before the 2019 Lok Sabha elections, there are hopes that it would focus on tax incentives to the salaried class.

Considering the needs of the common man, here are a few proposals which, if implemented, could help reduce the concerns of the common man.

1) Revising the minimum threshold limit: It is observed that the basic exemption limit of ₹250,000 has not been revised for four years now. Keeping in mind the inflation cost vis-à-vis corresponding earnings of an ordinary man, it is definitely required to double the limits and provide benefit to all sections at large.

2) Increasing the maximum limit of deduction under section 80 C: At present, the maximum limit of deduction under this section is ₹150,000. It was raised in the 2014 budget, and the limit has remained constant so far. By raising the limit to ₹200,000 the government could encourage the public to invest more in tax saving instruments which will ultimately be beneficial to them. Hence, the limit could be increased to ₹200,000.

3) Reinstating the provisions related to tax-free transport allowance and medical reimbursement: In the last budget, standard deduction of ₹40,000 from salary income was introduced. However, tax exemption provided to employees towards conveyance and medical reimbursement of ₹19,200 and ₹15,000 respectively were withdrawn. The revision has been made keeping in mind the requirement of pensioner class and reducing compliance/paper work of an employer for providing medical reimbursement to the employees. Given that the cost of medical treatment and the cost of travelling is rising, the government could consider reintroducing above allowances and pass the benefits to the salaried middle class.

4) Enhancing the deduction limit of home loan interest: Currently, a deduction up to ₹200,000 can be claimed for interest on housing loan during the financial year. It could be extended to ₹300,000 which will give an impetus to the Real estate sector and will help in pursuing a dream house.

5) Increasing the exemption limit of child education allowance (CEA) and hostel allowance (HA): It is very difficult to accept the limit fixed for claiming the CEA and HA which is ₹100 and ₹300 per month (maximum 2 children) respectively. It is pertinent to note that with respect to both the above allowances the existing exemption limits are operational since August 1997. The question that comes to one’s mind is why is this unnoticed in spite of tremendous increase in the education cost over the past years? Increasing the limit to ₹1000 and ₹1500 per month respectively shall certainly help the employees in reducing their tax burden.

Looking back at the budget history so far, except in 2014/2017 wherein the exemption/slab limit has been revised, the middle class continues to bear the hardship of paying decent taxes over all these years. One could expect this budget to suggest changes not restricted to only industry/sector specific but for the benefit of a common man who also plays a vital role in the overall growth of the economy.

Sudhakar Sethuraman is Partner, Deloitte India; and Vibha Bhaskar is Manager with Deloitte Haskins & Sells LLP