Dear government, you have informed that direct tax mop-up has grown by 14.1 per cent to Rs 8.74 lakh crore during April-December 2018. The rate of growth is even more impressive since collections of the corresponding period of fiscal 2017-18 also included extraordinary collections under the Income Declaration Scheme, which do not form part of the current year’s collections. On the GST front, monthly tax collections have been regularly coming between Rs 90,000 crore and Rs 1 lakh crore. These numbers are a clear testament to the fact that the honest taxpayer of the country is doing their job diligently. And, it is this honest taxpayer that has budget expectations and needs relief in the Budget that is less than 10 days away.
Usually, interim budgets are staid affairs since they are looked at as being simple vote-on-account being just ahead of an election. There is no hard and fast rule that stops the government of the day to announce an honest taxpayer-friendly budget ahead of the election. Budget 2019 needs to break away from that convention to give some much-needed succour to the silent and forgotten Indians that toil away laboriously. The forgotten men and women of the formal working class have been dutifully doing their bit in the service to this great nation. They might not be fighting wars at the border, but they are bankrolling the battles. Successive governments have taken this honest middle-class taxpayer for granted. The rich have their influence and they can get heard. The underprivileged also manage to get schemes due to their massive vote-banks. But, the middle-class remains alone, and on the back-foot. This class of extraordinary people has budget expectations from finance minister Arun Jaitley and wants him to go the extra mile in Budget 2019.
Budget Expectations 2019
Boost maximum tax exemption under Section 80C
The honest taxpayer has for decades supported the government’s demands. They pay taxes dutifully. So, the government should show its big heart by allowing taxpayers to save tax. Taxes can be saved by allowing taxpayers to invest more in select instruments. At present, the maximum tax exemption one can avail under Section 80C is Rs 1.5 lakh. This exemption can be taken by investing in a variety of investments such as PPF, equity, provident fund, ELSS, insurance etc. The exemption limit was last raised in the 2014-15 budget where it was increased from Rs 1 lakh a year to Rs 1.5 lakh. Truthfully, EPF itself often takes up a quite a big chunk of Section 80C window. Premiums for term and life insurance, while being necessary, also get covered in Section 80C. All in all, the actual room for future investments etc. becomes very low due to the Rs 1.5 lakh limit. This limit needs to be increased. Considering the increase in income and inflation, this limit is relatively low by today’s standards. An increase in this limit to Rs 2.5 lakh would help honest taxpayers save tax by investing in financial assets. The government can ask citizens to invest in infrastructure instruments that would help garner funds for building India, and these investments would be given a tax break. This would also be in line with the government’s stated objective of encouraging financialisation of assets and discourage sub-optimal investments in gold and real estate.
Bigger housing loan tax sop
The government has committed itself to the ‘Housing for All by 2022’ slogan. A lot of work has been done. Housing creates a virtuous cycle of demand that starts from land, raw materials, building, construction, employment and services. The silent middle-class has been furthering this cause and trying to meet its own need to have a home. But, help is required. While the government imposes a tax on selling homes, the tax benefit given for housing loans is too small by today’s standards. Today, good homes in metropolitan areas cost no less than Rs 70-90 lakh if one goes to a reputed builder. Plus, GST on under-construction homes bites quite a bit. This is why the government should consider increasing the tax deduction limit for housing loans, especially for buyers in metropolitan cities. A doubling of the current limit of Rs 2 lakh to Rs 4 lakh should be considered. Considering delay in housing projects and also inching up of interest rates, interest on housing loan for a self occupied house property which is limited to Rs 2 lakh may also be enhanced to Rs 2.5 lakh and the set-off cap of adjusting loss from house property against other heads of income may also be accordingly raised from Rs 2 lakh to Rs 2.5 lakh. Do also consider bringing stamp duty under the purview of GST. Since GST encompasses all taxes, central and state, keeping stamp duty out of its purview increases the total tax burden on consumers.
Spare LTCG on long-term corpus of retail investors
Last year’s budget introduced a Long Term Capital Gain tax of 10 per cent on gains of over Rs 1 lakh in a financial year. The middle-class understands the government’s motive for doing so. But LTCG has been put for equity mutual funds also, while strangely keeping unit-linked insurance plans out of the purview. Any which way, the Rs 1 lakh per year relief is too small. Today, Rs 1 lakh spread over 12 months would mean less than Rs 10,000 a month. This Rs 10,000 a month is woefully inadequate relief. Hence, the honest taxpayer expects the government to roll-back LTCG tax at least for long-term investments and retirement purposes. Why would the government want to tax a middle-class family’s plan to fund child’s education, daughter’s marriage or secure a financially independent retirement? The private-sector employee does not have any pension. They also don’t have job security, yet they try to save small amounts and use the equity market to grow it over the long-term. Any investment over 10 years should be made exempt from LTCG tax if the person doing it has a household income of less than Rs 10 lakh a year. Please, by all means, impose taxes on short-term trading, but kindly spare the silent and hardworking persons who are saving for their family and future.
Online transaction incentive
The Digital India campaign has been a good one. It has encouraged honest taxpayers to conduct all transactions in the digital mode. Yet, the shift from cashless to less-cash transactions needs to be heavily incentivised. Be it debit card, credit card, payment wallets and other online forms of payments, the Budget 2019 can introduce a 5 per cent discount on payment value for all such transactions. Very small and limited-period incentives really will not attract attention. A hefty 5 per cent discount on payment value for all digital transactions will surely boost the number of people doing transactions completely online. The government may even introduce a rule that rewards individuals and families who do more than 90 per cent of annual transactions online. Give them an income tax benefit, or award them some monetary benefit. Such a move will make Digital India a truly popular scheme. Doing transactions online is not a convenience any more, it directly helps the government’s cashless mantra. Do away with ‘convenience fees’ charged by service providers for online payments. The common man and woman of this country will surely support noble initiatives if good behaviour is rewarded.
Landlord PAN rule relief
According to Income Tax rules where the annual rent paid is more than Rs 1,00,000 per annum, it is mandatory to report the PAN of the landlord to the IT Department to claim HRA exemption. In case the landlord does not have a PAN, the onus is on the same tenant to obtain a declaration to this effect from the landlord with the name and address of the landlord. The government knows that in an average city an annual rent of Rs 1 lakh or Rs 8,333 per month is minuscule. Therefore, even for a lawful tenant if he/she is taking a house on rent and making a payment exceeding Rs 8,333 per month, obtaining the landlord’s PAN is near impossible. In maximum cases, the landlord declines to give PAN. They openly make black-money by denying the lawful tenant the chance to gain HRA exemption for money that has been paid. This landlord PAN rule is unjust and unfair on the tenant. How can a tenant forcibly find out the PAN of the landlord? Can the tenant and their family risk going against real estate strongmen who are landlords? Should the tenant be encouraged to illegally procure the PAN of the landlord? So, the government must give relief on this front and do away with this rule. Catch the errant landlords, but don’t penalize the innocent tenants.
Increase Atal Pension Yojana amount
The government had brought the Atal Pension Yojana in 2015. This scheme gives a guaranteed minimum pension of Rs 1,000, Rs 2,000, Rs 3,000, Rs 4,000 or Rs 5,000 per month from the age of 60. But Rs 5,000 a month after 30 years will be a pittance amid the inflation that we witness. Any common man or woman using the Atal Pension Yojana will hardly get much value from the maximum Rs 5,000 a month pension. If a few hundred rupees every month today can help a person hope for a Rs 5,000 pension after 60 via Atal Pension Yojana, the government should allow middle-class lawful taxpayers to plan their own pension. If somebody trusts the government and wants to deposit more funds today in hopes of a better and financially independent future at 60, the Atal Pension Yojana should encourage this trend. So, there should be higher amount of monthly pension options like Rs 20,000 to Rs 1 lakh if someone wants to do it. At 5 per cent annual inflation, thirty years later a person will need Rs 21,610 to get the same purchase value of what Rs 5,000 fetches today. Hence, the 2019 Budget must allow the honest taxpayer to plan their retirement in a more flexible way with the Atal Pension Yojana. Government officials may say that there is National Pension System or NPS available. But, NPS so far does not give a guaranteed minimum pension. When it is something as certain as retirement, Atal Pension Yojana with its guarantee provides a huge comfort than any other scheme in India.
The author is a financial journalist with 14 years of experience.