Dream Budget. When you wish upon the Budget

It is time to dream up the perfect budget. Corporate bigwigs are already lobbying for huge tax breaks from the new Government.

But why should companies get to plead their cases and not us? Given skyrocketing food prices, steep petrol bills and rising EMIs on home loans, our wallets are emptying out fast.

Here’s a list of goodies we hope the budget will shower on the aam aadmi this year.

This is one tax break that’s got everyone’s vote — raising the basic tax exemption limit. Currently, total income up to ₹2 lakh is exempt from tax. This limit was last raised in the 2012-13 Budget from ₹180,000. But since then, the cost of living has shot up substantially. The consumer inflation index has gone up by 18 per cent in the last two years.

Given that inflation is still high and may cool off only sometime next year, it is time to raise the ‘no tax’ bar. Many are gunning for a ₹5 lakh basic exemption. If it comes about, it would mean close to ₹30,000 of savings by way of tax outgo! Also, women were earlier offered a higher tax exemption than others, but this was done away with in the 2012-13 Budget. Let it be brought back to life!

With healthcare costs shooting up by 12-15 per cent every year and most of us queuing up outside private hospitals, the exemption limit of ₹15,000 a year for medical reimbursement by employers definitely needs a makeover.

The existing exemption is hardly any relief, even for minor surgeries and ailments.

A limit of ₹50,000-75,000 a year should do the trick. If you are in the 20 per cent tax bracket, a revision of the exemption limit to ₹75,000 will mean a tax saving of ₹12,000!

Similarly, the premium paid on medical insurance can be claimed as deduction only up to ₹15,000 under Section 80D . This limit is only a tad higher for senior citizens, at ₹20,000.

Both limits need to be raised keeping in mind the need for a bigger health cover.

Yet another outdated provision is the deduction available under Section 80C for investments. A lot is bundled under this one Section, which also has a ₹100,000 limit to boot.

Currently, amounts paid as premium on life insurance, contributions to provident funds, principal repayments on home loan, investment in small savings schemes and tax-saver mutual funds, among others, can all be claimed as deductions under Section 80C. In the last eight years, this limit has been kept unchanged. Some of the deductions permissible under the Section do not even qualify as investments. For instance, tuition fee, which is deductible under this section, is hardly an investment. It will make sense to take such items off the list and put them into a separate section.

Keeping in mind the need for increasing life cover and revving up investments, the limit under Section 80C should be raised to at least ₹3 lakh. This will mean about ₹40,000 tax savings for those in the 20 per cent bracket. Principal payments on home loans can be hived off into a separate section too, given the higher amounts it entails.

Besides, it’s not only corporates, which are carrying the burden of rising interest rates. Home buyers who have taken home loans have been grappling with higher EMIs too.

During the last Budget (2013-14), an additional deduction of ₹1 lakh was given for home loan interest.

But this was only for a limited period (loans taken between April 2013 and March 2014) and for home loans of up to ₹25 lakh. Otherwise, currently the interest on home loans is exempt from tax up to ₹1.5 lakh, with this limit being fixed more than 10 years back.

With interest rates and home prices on a rampage in the last couple of years, this limit needs to be scaled up significantly. Today, on a home loan of ₹50 lakh for 15 years at the lowest home loan rate (10.15 per cent), the total interest outgo works out to ₹3.17 lakh a year. This presents a good case for the exemption limit to be revised to at least ₹3 lakh.

You may wish for many more such tax breaks. Go ahead and dream big; it’s not every day that a new government presents its maiden budget.