The historic win of the BJP in the general elections has raised the hopes of the common man. While governance in general, corruption, black money continue to be important factors requiring urgent attention, income tax still remains a major concern for the common man.

It seems the new government realises the importance of having a tax policy roadmap, so that people are aware of future policies and can plan accordingly. It needs to put in place a rationalised and simplified tax regime.

The shrink

Runaway inflation has crippled household budgets, thereby reducing disposable income. One of the ways to address the above concern is widening tax slabs, thereby reducing the tax burden on the personal income.

Medical expenditure plays a crucial role while planning the household budget. In the recent past, there has been a sharp increase in the cost of medical facilities; thus, additional deduction from taxable income can provide some relief to an individual.

Currently, the deduction on account of health insurance premium and reimbursement of medical expenses by the employer are restricted to ₹15,000 per annum each (that is, a total of ₹30,000 per annum for both the benefits), which is relatively low in comparison to the cost of these expenses.

Hence, it is expected that current limit should be increased.

The deduction under Section 80C of the Income-tax Act has not been revised for a long time. Further, with too many investment/ expenditures (such as contribution to Provident Fund, repayment of the housing loan, life insurance premium, fixed deposit) forming part of the existing overall limit of ₹1 lakh, individuals are not incentivised to make investments beyond the specified limit.

Hence, the specified limit must be increased.

Realty bites

With regard to the property prices that have increased manifold in last couple of years, the deduction of interest on housing loan has remained unchanged to ₹1.5 lakh for a self-occupied property.

The government should revise the deduction considering the price rise. Also, it is expected to have a separate deduction for repayment of the housing loan in addition to Section 80C of the Income-tax Act.

Tax savings being an important driver for investments by a common man, the new government should consider providing additional investment-driven deductions, so as to promote savings and channelise income in a more productive manner.

Another cause of concern for a common man these days is wealth tax. Earlier, wealth tax was considered to be a tax on super-rich; however, of late, due to the rise in inflation the same has become hardship. Therefore, the threshold limit for levy of the wealth tax (which is currently ₹30 lakh) should be increased.

The people now look forward to the new government for providing some relief to common man. They eagerly await the Union Budget to see how many of these expectations are met by the government.

The writers are with Deloitte Haskins & Sells LLP

Related Topics