Union Budget 2017-18 will be presented in less than a week. The anticipation among the masses has reached fever pitch. The upcoming budget is the first of its own kind due to two reasons. For the first time in history, Union Budget and Railway Budget will be clubbed together, and the presentation will be done on 1st of February instead of 1st of March. The ending Financial Year 2016-17 was action packed and became witness to a lot of reforms. Based on government’s actions last year, here are 5 things that taxpayers can expect from the honourable Finance Minister.
The reigning government has been fighting the war against black money since 2014, but the year 2016 was the most eventful one regarding actions taken by the government. Back to back Income Declaration Schemes, demonetisation of big currency notes and several raids and surveys by the I-T department post demonetisation are some of the major steps taken by the government to eliminate black money. As a result of these actions, the government is expected to get a considerable amount of additional income. This surplus income could spell some relief in tax rates for the common people. The government will still be in a position to boost its revenue as its actions have culminated into the expansion of its tax net. Tax evasion has been becoming increasingly difficult, giving liberty to the government to lower tax rates without impacting its revenue.
NRIs find it difficult to sell property in India. The blame can be attributed to harsh TDS rules applicable in such cases. Under the provisions of section 195 of Income Tax Act, 1961, if an NRI sells property in India, the buyer deducts TDS from the amount he pays to the NRI. Sometimes, TDS rates go as high as 31%. TDS rates depend on whether NRI is making a short-term capital gain or long-term capital gain. However, complicated tax provisions make it difficult for a buyer to find out how much tax he should deduct. Therefore, to avoid any trouble, they often deduct higher TDS than applicable. This ultimately results in a loss for the NRI seller because the surplus tax deducted remains locked with the government until it is claimed as a refund. Therefore, relevant tax provisions need modification to give some relief to NRI taxpayers.
The real estate market is in a prolonged slump. Although the prices of residential properties have been stagnant for past few quarters, properties are still beyond the reach of ordinary people, and their dream homes still remain a dream. To ease the pressure on realty sector and the burden of tax on home loan takers, the government introduced additional tax deduction of Rs. 50,000 u/s 24 for first time home buyers. Demonetisation, which led to rising in bank deposits, brought interest rate on home loans down. However, demonetisation also had an adverse impact on realty sector as it left the economy cashless when a large number of transactions in this industry happen via cash. So, to balance the equation, the government may increase the tax benefit offered to taxpayers u/s 24.
In the past few years, the cost of education has risen at a stellar pace. Therefore, affordability of quality education has become distant for ordinary citizens. Income Tax Act provides tax benefits under section 80C which covers expenses incurred in the form of tuition fees. However, there are several other costs which one incurs on which tax deduction is not available. Here, it is important to understand that education is paramount for the growth of the country. Therefore, the government should offer tax benefits on all expenses involved in education rather than just tuition fees. This will ease the burden on parents and make education more affordable.
A healthy nation is a wealthy nation. There are several tax benefits provided by the government through section 80D of Income Tax Act, 1961 but it is felt by everyone that they are not enough. The first thing that our Finance Minister can do here is to increase the quantum of deduction on health insurance premium paid to 100%. Secondly, the government should increase the amount of tax deduction available on preventive health check-ups. This will motivate the people to get regular health check-ups and reduce their medical expenses by staying healthy. Finally, the government should increase the limit of Rs 30,000 on the medical expenses incurred on the health of super senior citizens (more than 80 years of age) should be increased and allowed for the actual expenses incurred. This will provide a huge relief to these citizens in the form of tax relief.