The government will present Interim Budget 2019 on February 1. Being the last Union Budget by the government before general elections due by May, expectations are high for relaxation in income tax rules. At a time when the government needs to balance growth with revenue collections, easing of income tax rules may be a challenging task, say experts. The finance minister had in the last Union Budget kept the income tax slabs unchanged while announcing some key changes, such as introduction of a standard deduction of Rs 40,000 for the salaried individuals.
Tax experts say some changes are likely such as measures to address the farm distress. Here's what they say on the upcoming Interim Budget:
Rakesh Dharawat, partner, Dhruva Advisors:
"Medical reimbursements and conveyance allowance have been subsumed in the standard deduction of Rs 40,000 introduced last year. The Government should address the demand of increasing the standard deduction amount to at least Rs 75,000."
"From the perspective of the common man, it is a long standing demand of people for increase in tax slabs and increase in thresholds for investment-linked deductions (Section 80C)."
Sandip Sabharwal, investment adviser:
"Given the current mindset of the government it is highly probable that there will be significant relaxations given to the small taxpayer in this budget. Only around 10 per cent of the total income tax collection comes from people who report earnings of Rs 10 lakh or below."
"The key challenge for the government in the context of budget 2019 is to balance the interests of growth with that of revenue at a time of a slow global economy. Low farm prices have led to distress on the rural side. With Income tax relaxations there will be need to meet revenue targets which will be difficult."
Ashok Shah, partner, N.A Shah Associates LLP:
"Government has not changed slab rates for individual taxation in last budget. In the current year, there has been substantial increase in direct tax collections. This reinforces the belief that moderate tax rates lead to increased compliance. Hence common man can expect relief in tax rates for individuals."
"Last year, Government introduced standard deduction for salaried employee and at the same time withdrew various exemptions. This change was done to simplify the tax administration. On an overall basis, there was no substantial relief to the salaried employees. Salaried employees have to bear burden of higher taxes as they do not have any avenues of tax planning."
"Hence some relief can be expected by way of increase in quantum of standard deduction."