The countdown to Union budget 2020 has already begun. Considering the state of the Indian economy, finance minister is expected to unfold measures which give boost to the economy Following are ten propositions for the Budget :
1) Income Tax Slab
Income up to Rs. 5 lakh should be made exempt from tax. Peak rate of 30% should be made applicable on the income of Rs. 20 lakhs and above. We may see a tax of 10% for the people with annual income between Rs. 5 lakhs to Rs. 10 lakhs, individuals earning between Rs. 10 lakhs to Rs. 20 lakhs may get to pay tax @ 20%.
2) Contribution to the National Pension Scheme
In order to give tax breaks to salaried taxpayers, Finance Minister should consider doubling the limit of tax-free contribution into National Pension Scheme (NPS) from the present Rs. 50,000 to Rs. 1 lakh per annum. This would attract public savings into pension plans which forms the backbone of post-retirement social security for millions of Indians.
3) Education savings
Education is very important for a family in India. It is high time that incentives should be given specifically to this sector. Government should consider removing tuition fee from Section 80C and a separate deduction should be given for education expenses. Further Budget it should give tax benefit to taxpayers who invest in saving instruments of children education.
4) Interest on home loan deduction
Deduction for interest on home loan available is Rs. 2 lakhs which was last revised in 2014. Since then the property prices have gone up significantly. Therefore, it would be prudent to raise this deduction limit to Rs. 5 lakhs so that homebuyers can take benefit of this tax break.
5) Threshold for Long Term Capital Gain
The tax on gains from equities beyond Rs. 1 lakh has dented investor sentiment. This threshold should be hiked to Rs. 3 lakhs at least. This would boost the stock markets and provide stimulus to foreign investments as well.
6) Exempt switches between schemes from the capital gains tax
For retirement people invest in mutual funds however switching from one scheme to another is treated as sale consideration and is taxable. As compared to it when an investor switches from one scheme to another in ULIP, a pension plan or the NPS there is no tax. To bring parity in the tax treatment of retirement savings switch between one scheme to another should be exempt from tax.
7) Triple taxation
There are five taxes on capital in India - corporate tax, dividend distribution tax, tax on dividend above Rs. 10 lakhs, capital gains tax( long term and short term) and securities transaction tax. The Budget should streamline and rationalize the capital market tax and scrap dividend distribution tax so that same income is not taxed multiple times. If dividend distribution tax is abolished it will increase the investible funds of the corporates and incentivize capital formation.
8) Tax break for the corpus to buy a house
The Budget should come out with the scheme in which tax breaks should be given special investment done for down payment or buying a house. An investment of Rs. 5 lakhs per annum should enjoy tax benefits which shall motivate people to save for a house and shall give a boost to the housing sector also.
9) Increase deduction limit for health insurance
Healthcare costs in recent years have gone up significantly as a result of which people need to take higher health cover. The budget should encourage this by raising the deduction limit for medical insurance from Rs. 25,000 to at least Rs. 50,000 for self and family. The limit for senior citizen should be raised to Rs. 75,000.
10) Voluntary Disclosure Scheme
Voluntary Disclosure Scheme could be launched to increase taxpayers to declare their untaxed wealth. This would help taxpayers to come clean on their undeclared wealth and would increase the tax base.
In the current scenario, the sale agenda of the Government should be growth even if it comes at the cost of fiscal prudence. Quick fixes are needed to address slowing demand and stagnant private capex.
What are your suggestions on the Budget 2020? If you want to share your thoughts with the Finance Minister Smt. Nirmala Sitharaman tweet directly #Budget2020
The author is a practicing Chartered Accountant and can be contacted at sandeep@kcccas.com.
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