Every year when the union finance minister presents the budget speech, the ‘aam aadmi’ looks onto him with expectations of reducing their tax liability. Even this year when Arun Jaitley opens his briefcase which carries the budget document you and I would expect him to dole out some goodies.
We may not be disappointed as the plan is to reduce tax burden on middle class and lower class. In finance minister’s own words ‘he is not in favor of taxing the low income groups’.
On the 28th of February the finance minister may announce a raise in the income tax exemption limit by around Rs 50,000 taking the total income tax exemption limit to Rs 3 lakh.Read our full coverage on Union Budget
This tax sop for middle class will come at the cost of a revenue hit of close to Rs 17,000 crore, sources have said.
The union minister in his maiden budget had increased the exemption limit by Rs 50,000 taking the total limit to Rs 2.5 lakh.
Another area of focus is on the medical reimbursement. Currently, expenditure incurred by an employee is exempt from taxation upto the extent of Rs 15,000 per annum. The industry has urged the finance minister to revise it to Rs 50,000.
Based on the suggestions of the industry the ministry carried out an analysis for the feasibility of the said move. This roughly translates into a revenue hit of close to Rs 10,000 crore as per sources.
The finance minister would revise the medical reimbursement income tax exemption limit but upto what extent is something we need to wait for the announcement in the budget speech.
Currently, if you invest in a fixed deposit you are required to lock it in for five years for tax exemption. The finance minister may revise the lock-in downwards to three years for tax exemption benefit.
This proposal was submitted by the banking lobby which has sought for parity between debt funds and fixed deposits. Currently only a five year FD gets a benefit under section 80C whereas a 36 month debt fund gets the tax benefit.