He Union Budget will be presented on February 1. Expectations are running high that Finance Minister Arun Jaitley will announce a slew of reforms aimed at easing the lives of the salaried class. The first four Budgets of the Narendra Modi government focussed on institutional and economic reforms. Will this year’s Budget lift the sentiments of the general public hit by price rise post GST and demonetisation? The PM has in the recent past had hinted that the Budget will not be a populist one.
However, there are a handful of reforms that the salaried class can look forward to. Standard deduction As the share of direct tax in total tax mop-up has gone up, it is unlikely that the government will tweak direct taxations norms to a large extent. It still gives enough room for some reforms which can make life easier for the salaried class. One of the biggest expectations of the salaried class is change in the salary structure. The deductions under the salary slabs, like house rent and medical expenses, are hopelessly outdated and not at all in sync with current market realities.
“This allowance is very small to meet the needs of a family. Therefore, this amount must be increased to at least H30,000,” says Archit Gupta, founder and CEO, ClearTax.in. According to experts, introduction of standard deduction will go a long way to benefit the salaried class. “Individuals in employment do need to incur expense to keep them updated with the latest developments and meet the requirements of their employment. Therefore, to bring in parity, a standard deduction should be allowed to individuals carrying on employment,” says Vikas Vasal, national leader – tax, Grant Thornton in India.
Experts believe giving a generous standard deduction to salaried employees would create parity with non-salaried assessees. “For standard deduction to be effective and actually be at parity with business professionals, it should be at a flat 10 per cent of gross salary,” says T P Ostwal , a tax expert. Experts also suggest that incentivising digital transactions will be a win-win for both citizens and the government and it will encourage people to digitise their financial transactions.
“Tax concessions on digital transactions such as reduced tax rates for direct as well as indirect taxes can also encourage high participation in digital economy. Ove r a l l , t h i s might lead to higher tax revenues by increasing the taxpayer base and help in further lowering of tax rates,” says Chetan Chandak, head of tax research at H&R Block India. The government may increase income tax deductions on investments made by taxpayers in securities with a rider that the exemption will be available only on investments made in government infrastructure projects.
Incentivising digital transactions
Experts believe that giving incentives to individuals for using digital transactions will be a win-win for both citizens and government and it will encourage people to digitise their financial transactions
.jpg)