Surrounded by hopes of acche din, the aam aadmi (or the common man) is looking forward to the Union Budget 2016-17. The common man expects that apart from an allocation to various sections of the economy (which can result in economic progressive if implemented rightly), the Government leaves behind tax sops for them as well.

So let’s see what the expectations of the aam aadmi are …
 

• Hike in basic exemption limit: Last year, the basic exemption limit was left unchanged although there were expectations that it would be increased from Rs 2,50,000 to Rs 3,00,000 and the 30% tax slab would be applicable only to those drawing an income of more than Rs 20 lakh. However, this was not addressed.
  
  Hence, the expectations that at least the basic exemption limit will be increased from Rs 2,50,000 to Rs 3,00,000 linger; this way higher disposable income will be left in the hands of the common man. In fact, this will work well for the economy as well with consumption/demand and investments potentially reporting an uptick.


• Increase exemption for education allowance and hostel allowance: Salaried individuals currently enjoy a tax benefit on education allowance and hostel allowance, which is pittance at present. For education allowance, the exemption is Rs 100 per month per child, for a maximum of two children (i.e. in other words Rs 2,400 p.a. totally), while for hostel allowance it is Rs 300 per month per child, for a maximum of two children (i.e. in other words Rs 7,200 p.a. totally). These limits were set in the year 1997-98 and are by no means comparable to the present times, when the cost of education and hostel accommodation has jumped leaps and bounds.
  
  Hence, the common man expects that Finance Minister, Mr Arun Jaitley, re-evaluates and increases the limits under these exemptions to a rational level considering the rising cost of education.


• Consider exemption for travel allowance: In the last Union Budget 2015-16, the transport allowance (which was introduced in 1998) was increased from Rs 800 per month to Rs 1,600 per month, thereby providing a relief of Rs 19,200 annually. But, it still appears to not be enough when it comes to commuting in large cities or metros, where the cost of commuting has gone through an upward revision several times in base fares of public transport.
  
  Naturally, the common man hopes that the Government considers revising this exemption, making it realistic to the times we live in.


• Revise reimbursement for medical expenses: The reimbursement of medical expenses, which was first introduced in 1998, has been left unchanged since then. The tax deduction still stands at Rs 15,000 p.a., rather insufficient in times where medical inflation has spiraled and left many worried.
  
  Last year, in the Union budget 2015-16, the Government increased the deduction under Section 80D for premium paid for medical insurance to Rs 25,000 (from Rs 15,000 earlier) for non-senior citizens and to Rs 30,000 (from Rs 25,000 earlier) for senior citizens. For very senior citizens who may not be covered by health insurance, the Union Budget 2015-16 also allowed a deduction of Rs 30,000 towards expenditure incurred for medical treatments. But, these alone are not enough as the cost of healthcare has escalated.


• Revise deduction for rent paid by individuals who do not receive a HRA for an accommodation: Currently section 80GG of the Income-tax Act, 1961 provides deduction to salaried and self-employed individuals who do not receive HRA (House Rent Allowance) and are paying rent for an accommodation (irrespective of whether furnished or unfurnished) occupied for residential use. The deduction is least of the following (and is available if conditions set out are satisfied):
   
  • 25% of your total income;
  • Rs 2,000 per month;
  • Rent paid in excess of 10% of your total income.
  
  But, this deduction set in 1996 appears quite meaningless today, because even in smaller cities the rents are far higher. It is expected that Government cogitates reasonably and amends the deduction under this Section.


• Sweeten the deduction for interest on housing loan in case of under-construction property: Last year in the Union Budget 2015-16, the maximum amount one could claim as a deduction under Section 24(b) of the Income-tax Act for a Self-Occupied Property (SOP) was revised from Rs 1.50 lakh to Rs 2.00 lakh. For property under construction too, where the construction is completed within three year from taking the home loan, this deduction was available. But for properties under construction taking more than three years to complete, the deduction whittles straight down to Rs 30,000.
  
  Recognising the present scenario, where there’s a delay in completion of projects and handing over the houses (as a result of lull in the real estate industry), the Government should do away with the restricting provision of three years to bring relief to the common man.





 

Besides, the Government should ensure that the investment climate remains conducive. There are reports and views doing the rounds for equities -- the period of long term capital gains may be revised from one year to 3 years. If this happens, it will spook the markets and investors would be dissuaded. The positive is, of course, that the discipline to invest for the long-term will be infused.

Its a wait-and-watch game now for the aam aadmi to see if Finance Minister, Mr Arun Jaitely fulfills these expectations. The insensible exemptions and deductions currently levied require to be made more meaningful for the common man. But will Mr Jaitley take the populist approach, especially when the path to fiscal consolidation is being charted? Nevertheless, let’s hope that Acche Din dawns for the Indian economy and Aam Aadmi. ☺

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