The weeks before the Union budget are days of wishful thinking for the common man. It is always the expectation that the threshold and tax exemption limits will be increased. This year is no exception, and the common man would definitely be happy if his wishes are met.
Realistically speaking, as we move closer to implementing the Direct Taxes Code (DTC), the personal tax slabs in this budget could be aligned to the proposed DTC thresholds. So we can expect the minimum income limit not subject to tax being raised to 2 lakh rupees from 1.9 lakh rupees.
Also, the threshold limit of applying 30 pct tax rate may be raised to 10 lakh rupees from 8 lakh rupees. This together would account for reduction of taxes by 21,000 rupees (plus the reduction in effective surcharge).
There are certain other areas in which amendments are welcome. For example, deductible interest on home loans taken for houses for self-use are pegged at a maximum of 1.5 lakh rupees. It would be a welcome move to increase this limit to 3 lakh rupees or keep it at par with the provisions applicable to a house on rent. In the latter case, the entire interest payout is allowable as a deduction.
In the absence of state-funded social security schemes for retired people in India, unlike the West, it is important for an individual to secure his post-retirement life.
Unfortunately, tax saving is often the driver for investing in such retirement plans. Presently, deductions under section 80C, which allows tax sops on such savings is pegged at a maximum limit of a lakh rupees. This limit can be extended to 3 lakh rupees to encourage more saving.
Also, the wealth tax threshold may be increased from 30 lakh rupees to a crore rupees in line with provisions in the DTC.
(The views expressed in this column are the author's)