There are a lot of expectations from the upcoming budget and the new Finance Minister Nirmala Sitharaman. The government’s focus remains GDP growth and a very important component of the GDP is tax receipts.India’s direct tax to GDP ratio stands abysmally low at 5.98% as of FY18. A higher ratio can be achieved by having more people paying tax as well as rewarding the existing taxpayers with more benefits. Here are some ways in which this can be done:
1) Changing the tax slabs such that taxable income up to Rs 5 lakh is tax-free. The tax rebate can be done away with. This will help save the costs associated with filing returns for taxpayers in the Rs 2.5 lakh to Rs 5 lakh tax bracket.
2) Getting cities like Bengaluru and Hyderabad to be classified as metro cities for Housing Rent allowance calculation. The list of metro cities has not been updated for many decades and cities like Bengaluru and Hyderabad are fast growing in population with a lot of salaried moving in from other metro cities for employment. Hence it is only fair to classify Bengaluru and Hyderabad as metro cities for HRA calculation
3) Currently, the leave travel allowance (LTA) only includes domestic travel. With the number of Indians taking foreign vacations jumping sharply over the last few years, international travel should also be considered for LTA. Further, boarding costs can be included.
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4) The current children’s education allowance is Rs 100 per child up to 2 children. Given the current education costs, this allowance should be increased manifold to at least Rs 5000 per month for up to 2 children.
5) Section 80C provides a great opportunity for the middle class to save on taxes as well as save for the future. This limit has remained at Rs 1.5 lakh for the last 5 years and needs a revision. The government can consider increasing Section 80C limit to Rs 2.5 lakh per year.
6) National Pension Scheme (NPS) is a great way to save for retirement. However, at retirement, only 60% of the accumulated corpus can be withdrawn tax-free and the balance needs to be invested into an annuity. If this 40% can also be allowed to be withdrawn tax-free, the retired will be able to choose the way they want to invest their funds.
7) Retirement schemes from mutual funds should also be included in Section 80CCD. This way, individuals will have more options to decide from, for retirement planning
8) Currently, an individual can invest capital gains arising from the sale of long term assets into bonds under Section 54EC. Mutual Funds with at least 3 years lock-in should also be allowed under Section 54EC in order to give investors a wider choice of products to reinvest capital gains.
9) Property is a prized asset for most middle-class owners with many putting a large part of their life savings into buying a home. Hence having clear titles is imperative for homeowners. Towards this, states can consider the Rajasthan model of of certification of titles, which verifies ownership of a property. Digitization of land records helps with providing clarity on ownership status, facilitates quicker transactions and minimizes the scope of land disputes. This activity needs to be expedited to make property related transactions easier, cheaper and cleaner for citizens.
10) Finally, most cities in India are facing a major water crisis and the government needs to have a large allocation in the budget towards measures to counter the water scarcity.
Original Source:Photo Credit: Deccanherald
Source: Article written by Mrin Agarwal in Deccan Herald
Originally published on: 04 Jul 2019Original article link: https://www.deccanherald.com/business/budget-2019/budget-2019-reward-the-honest-taxpayer-744546.html