25 ideas for Budget 2018 to make common man's personal finance less taxing
26 December 2017
Will the Budget bring down taxes? This is probably the most-asked question in the weeks before the Finance Bill is tabled in Parliament. But though we are a nation obsessed with tax, the startling fact is that only 3% (4.1 crore Indians) of the total population filed income tax returns in 2014-15. Only 1.6% actually paid income tax. One out of two Indians who filed a return declared zero taxable income.
Even so, the budget proposals relating to tax slabs, deductions and exemptions are very closely watched by Indians, almost as if the Budget is only about personal taxation. In the previous Budget, nearly everybody had expected that the finance minister will offer significant tax relief to the middle class to act as a balm after the searing pain of demonetisation. However, though the Budget did reduce the average taxpayer's tax burden, it also took away some benefits. The cap on the deduction of home loan interest was a major shock for those with houses put out on rent.
This year, the expectations of a taxpayerfriendly budget are even higher, given that five states have assembly elections in 2018 and another three in 2019. Many economists fear that the government will roll out a populist Budget.
As the Finance Minister and his team sit down to frame the Budget, ET Wealth has a few suggestions. We have short-listed 25 measures that experts from the financial services industry would like to see in the Finance Bill, 2018.
Admittedly, some of these measures, like a longer tenure for education loan deduction, a separate deduction limit for pure protection term plans or making NPS investments tax free, will have an impact on revenue collections. The government, already under pressure to rein in the fiscal deficit, may not be able to introduce all such measures. But most of the other steps will not have any significant impact on revenue collections. They will only make life easier for common taxpayers, investors and consumers.
Bring back standard deduction for salaried class:
The Finance Minister indicated that there are plans to reduce corporate tax rates this year, as in previous budgets. He should also consider reducing the individual tax rates or increasing slab limits. While others are paying tax after the deduction of expenses, the salaried class is obligated to pay tax at the gross level. This is an unfair arrangement. The best way to resolve this is to bring back 'standard deduction'. A flat standard deduction percentage can be fixed for the salaried class, thereby restoring equity between them and other taxpayers. - ASRUJIT MANDAL, PARTNER, BDO INDIA