Right from farmers to corporates, everyone has put up their wish-list to the Ministry of Finance.

[Read: What The Indian Mutual Fund Industry Expects From Interim Budget 2019]

As reported by the Business Today, dated 11th January 2019, a survey was conducted by Local Circles---a citizen connect platform--- states: 64% of the respondents wanted the government to include tax measures in the Interim budget and 64% have asked for a Universal Basic Income Scheme to counter unemployment.

Furthermore, the survey revealed that in terms of sector-wise allocation, 43% of the respondents want agriculture to be the top priority, while 23% voted for infrastructure, 18% for skilling for employment and 16% for the environment. However, interestingly, a whopping 71% of the citizens do not want the government to announce agricultural loan waivers.

Affordable housing also remains a key election issue. While 31% of the respondents want the government to give interest rate subvention for first home buyers, 29% said separate income tax exemption limit for EMIs on housing should be made to make housing affordable for middle class and 18% demand an increase in the home loan caps eligible for a subsidy. Moreover, 22% of the voters want an increase in the definition of affordable housing from 60 sq. metres to 120 sq. metres.

Let’s look at the top expectations set forth by the aam janata:

1. An increase in income- tax base exemption:

   The aam aadmi (or the common man) who voted the Modi-led-NDA government to power with a thumping majority, is expecting an increase in the current income-tax base exemption limit of Rs 2.5 lakh to Rs 3 lakh— apart from the rebate that is available under Section 87A of the Income Tax Act, 1961.

   The Confederation of Indian Industry (CII), on the other hand, wants the government to increase the income-tax base exemption limit to Rs 5 lakh so as to provide a thrust to the economy- mainly vide the consumption theme. Plus, the industry body has suggested lowering the highest personal income-tax rate from the current 30% to 25%.

2. Increase in the deduction limit under section 80C:

   The contributions made towards the Employees’ Provident Fund (EPF), repayments on the home loan, and tuition fees, and certain tax-saving instruments (viz. PPF, NSC ELSS, life insurance premium), etc., qualify as deductions under Section 80C, up to a sum of Rs 1.50 lakh per annum. However, many taxpayers easily exhaust this limit.

   Therefore, there are expectations that this limit should be increased to at least 2.5 lakh whereby to increase savings.

   [Read: 4 Tax-Saving Investment Options for Risk Takers]

3. Hike in standard deduction:

   Another demand, albeit a less frequently voiced one, pertains to the standard deduction limit. In the last year’s Union Budget 2018, the government provided for standard deduction of Rs 40,000 per annum for salaried individuals in lieu of medical reimbursement and transport allowance.

   In this year’s budget, there are expectations that it be increased to 50,000 per annum, to provide additional relief to the salaried class to incentivise savings.

4. Removal of Long-Term Capital Gains (LTCG) on equity investments:

   Some market participants hope this tax to be removed to revitalise the animal spirit in the Indian equity market.

   Indian investors are still trying to absorb the effect of the Long Term Capital Gain (LTCG) tax on their investments in equity shares and equity mutual funds since its introduction in last year’s budget. LTCG realised on equity mutual funds after 1st April 2018, attract tax at 10% per annum. Yes, 10% of your gains in equities may work out to a huge chunk of money.

   [Read: The Impact of LTCG Tax On Equity Investments]

5. Increased deduction on home loans and affordable housing:

   To push the “Housing for All” programme, the government may increase the budgetary allocations to Pradhan Mantri Awas Yojana. Also, the first-time home buyers may expect some more tax deduction, which is currently Rs 50,000 per annum under Section 80EE of the Income Tax Act, 1961.  

   Also, given that home loan rates have become costlier, individuals expect that the interest deduction limit under Section 24(b) for Self-Occupied Property should be increased from current Rs 2 lakh per annum to Rs 3 lakh per annum. 

6. Increase the deduction limit under section 80D:

   Last year, the Union Budget 2018 showed empathy and care for senior citizens by raising the monetary deduction limit for health insurance paid under Section 80D  from Rs 30,000 to Rs 50,000. The Budget 2018 even raised the limit of deduction for medical expenses for specific critical illness from, Rs 60,000 (for senior citizens), and from Rs 80,000 (for very senior citizens) to Rs 1 lakh under section 80DDB.

   This year, the non-senior citizens expect an increase in the limit from the current Rs 25,000 per annum for the medical insurance premium paid. 

Will the interim Budget 2019 live up to these expectations?

Well, only time will tell. Watch out for the Budget 2019 tomorrow- 1st February 2019.

Till then Happy tax planning for FY2018-19.

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