The annual Union Budget for financial year 2016-17 has come and gone, and like each year there are mixed reactions from all quarters. While some call it a balanced budget, others, especially the salaried class, can claim to feel the pinch.
There are hits and misses in the Budget, but do any of the misses impact your personal finances directly?
Let’s find out as we look at five aspects the Budget 2016-17 missed out on a personal finance angle.
1: No increase in tax exemption limit
If asked before the Budget Day as to what are they watching most keenly, 9 out of 10 taxpayers would point to the tax exemption limits. Tax exemption limits, including tax slabs and tax rates, are one of the most feverishly tracked items in the run up to the annual Budgeting exercise. This year's Budget did not touch the minimum tax exemption limit which remains fixed at Rs 2.5 lakh. The rising inflation and high cost of living were good enough reasons to consider an increase in the tax exemption limits, but the Finance Minister has put a hold on it for now.
This means there is no change in the tax exemption limit, tax slabs, and tax rates. Here are the tax slabs and rates for the common citizen for financial year 2016-17.
2: Deductions under 80C left untouched: Tax exemptions under Section 80C is by far the most popular tax saving tool used by almost every tax payer. Section 80Chas, over the years, been cramped with too many financial instruments vying for the same Rs 1.5 lakh of exemption. The wish list of the common man to increase the limit under Section 80C was left unfulfilled. It was felt in various circles that since tax slabs were left unchanged, an increase in the deduction limit under Section 80C could have been considered.
There were also requests to consider a dedicated sub-limit for insurance and pensions under Section 80C. With these unaddressed, you will continue to get a maximum tax deduction of Rs 1.5 lakh under Section 80C, as in the current financial year. It is against a long list of tax saving options, the benefits are limited to just Rs 1.5 lakh.
3: No rollback for service tax deduction: The hike in service tax rate post 2015-16 Budget is pinching the pockets of the common man, as it is escalating almost all payments making by them right from telephone bills and banking services to eating out at restaurants. But with this year’s Budget, the service tax has only escalated to 15%, with the addition of 0.5% cess, called the Krishi Kalyan Cess.
For instance, a bill of Rs 2,000, comes to Rs 2,290 with the addition of 14.5% service tax. Now as it comes to 15%, it would come to Rs 2,300. When extrapolated to all such household bills that attract service tax, this would make a huge difference in the monthly household budget of the common man. The expectation of removal of service tax on insurance premium also remained unfulfilled, making even insurance premium payments expensive.
4: No increase in FD TDS limits: Many banks had requested the Finance Minsiter to consider increasing the TDS limit on bank deposit interest from Rs 10,000 to Rs 15,000. A revision in TDS rates appeared to be on the cards as it was long overdue. However, the TDS rates, including the rates for bank fixed deposits, have been left unchanged.
Just like the current financial year, your bank will continue to deduct TDS on bank fixed deposits if your FD interest is more than Rs10, 000 annually.
5: Medical costs: The biggest challenge that our country is facing now in terms of the finances of the common man is access to low cost quality healthcare. The manufacturing costs of medicines and medical devices are a critical part of the overall healthcare cost. More affordable healthcare insurance is also a demand of the times. Hence, a focus on bringing down the cost of medical care for the common man was probably warranted.
The Budget 2016-17 is applauded for focus on the rural community as well as senior citizens. It may be a social-reform oriented one, but the middle class has been left only partially happy. The common man can now look forward to implementation of the positive measures of this Budget and take advantage of some of the good things on offer.
The author is the CEO of BankBazaar.com