The decisive victory of Narendra Modi and his party has raised expectations of an aam aadmi like never before. Every step the new government takes will set the course of action for the next five years.
These are some income tax expectations which the aam aadmi has from the government.
Increase in exemption limit for housing loan interest
The tax benefit on housing loan interest for self-occupied property has remained constant at Rs. 1.5 lakh since 2001. However, real estate cost has increased many times and so is the quantum of loan which needs to be availed. An increase in exemption limit for self-occupied property to Rs. 3 lakh can result in additional tax savings and will also help the realty sector.
Increase in the basic exemption limits
Many people are expecting an increase in the basic tax exemption limit from Rs. 2 lakh to Rs. 3 lakh. This will help all the tax payers who are filing their tax returns.
Restoration of standard deduction
Till 2005, standard deduction was allowed for salaried tax payers. However, it was later removed. Providing standard deduction helps in achieving parity between salaried individuals and people earning business income as they can claim expenses from their business income. A standard deduction of Rs. 50,000 will be a welcome change.
Increase in exemption limit for medical expenses
Currently, medical expenditure reimbursed by employer is tax exempt up to Rs. 15,000 per annum. This limit was set in 1998 and has not changed since then. Given that the cost of medical care has consistently increased, it will be a welcome step for the government to consider increasing this limit to Rs. 50,000 per annum.
Increase in exemption limit under section 80C
At present, tax deduction under section 80C combines a whole lot of investments and expenses under the Rs. 1 lakh limit. Tax deduction is an important incentive for many taxpayers to invest in PPF, National Saving Certificate, Post Office Deposits, Senior Citizen Saving Schemes, etc. However, keeping up with the inflation and in order to encourage higher savings, this limit can be increased to Rs. 3 lakh.
To sum up
More disposable income will increase the spending power and help the economy grow. If the government is able to bridge the gap between the fiscal deficit and the aam aadmi's expectations, it will be a win-win for all.
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