What to Look Out in Budget 2017 – Personal Finance Related Expectations

This year’s Budget 2017 will be very important. The year (financial) has been very challenging with Demonetisation taking much of the blame. But now our savings have been with the banks for quite some time and we all look to relief what Budget can do for us in the next financial year. The major portion of the budget is the announcements related to Personal Finance, Individual Taxation and Incentives to boost one’s surplus income. Hope Budget 2017 will be long term beneficial for country and people of India who are really hopeful now.

The biggest drawback living in an “always election mode” country is short term measures take priority. Again with 5 states going for elections starting next month, the sops (or freebies) will limit the genuine requirements of taxpayers.

I often look budget as the “mood setter” for the country. If people are happy, it culminates into spending, positivity, and economic growth. That is why I call budget as an emotional economical activity.

Here is what I have compiled as what Indian public want, especially one who fall in various tax brackets and pay fees/charges/other taxes (and sometimes penalties too).

• The slabs of Income Tax need to go up

The current base slab of 2.5 Lakhs is age-old now. We expect this to go up to 3 Lakhs or even more.

We may also see 2-3 more slabs in between 5 to 15 Lakhs this time gainst the 3 prevailing slabs.

Also, we may see limits going up for Senior Citizens.

Will the Standard Deduction come back? Well, it should as logically human bodies depreciate too. So a deduction must be given to workforce to balance this as it is given to machinery or furniture owned by companies.

The government is in pleasing women mode (as evident from various announcements on LPG & pregnancy) hence, working women may get additional slab benefit.

Also, women are expecting income deduction against expenses incurred in day care facilities and child care.

• Section 80 C limit required to go up

If income slabs will be increased, so shall the Tax Saving sections be.

The limit may go to 2 Lakhs with additional sections for NPS/long term Infrastructure related bonds. Some years ago Infra-Bonds were part of Sec 80C, But we think a separate investment fund is required looking at the infrastructure requirements.

• Clarity on NPS withdrawals

Despite a separate benefit of investing Rs 50000/- for (salaried only, the schemes is still unattractive as the withdrawals are to be taxed at maturity. This is quite opposite of PPF or EPF. NPS has given superb returns and has added a lot of flexibility in terms of asset allocation choices. It really needs support to spread.

• Deduction of Rs 10000/- to be increased and to include other deposits too

Currently, under Sec 80TTA, only Rs 10000/- can be saved per year on savings banks account. After 8^th Nov, the individual bank deposits have gone up manifolds, resulting in more interest income. Maybe not in the current year but, Government can at least bait people to continue their deposits in a bank or converting SB balances to Fixed Deposits. This limit of Rs 10K should go up.

• Advance Tax Limit of Rs 10000/- to go up

Currently one has to pay advance tax if he is expecting his tax amount for that particular year to exceed Rs 10000/-. Salaried people do this through TDS that their employer deducts while paying salary. But this amount is too low and a lot of paperwork and CA fees is involved for business owners and professional practitioners. Many people would like to come clean now and declare their full income. The limit should go up to help these small business or practice holders.

• Conveyance and medical allowances
  

It took many years to increase conveyance from Rs  9600 to Rs 19200. Same is Medical expenses stuck at Rs 15000/- since last many years. We expect an increase here due to inflation.

Conveyance or transport allowance although increased in April 2015, to Rs 1600 pm is still too less. Ask a person who travels to his office in a metro or sub-metro city.

• Home Loans

The market for genuine home buyers may emerge as black money ask has gone down and banks are offering good rates for first time home owners. We may see the current Rs 2 Lakhs interest deduction to go up. Also, people buying a second home have to take rent of the second home (deemed to be rented out) as income. There can be a relaxation here. 

Other Things:

• Social Security Phase 2 may be implemented. Aadhar to be mandatory linked to banks and social security schemes may be announced where the benefit will be directly transferred to the account.
• An employee may get to see more flexibility in increased meal limits, mobile phone & internet reimbursements (Jio effect) or LTA being extended to foreign destinations too.
• GST already delayed to July 2017, means fewer taxes on eating out and entertainment.
• Majority services under GST are planned to be taxed at 18%. The current service tax is 15%. So Finance Minister can increase it by 1% to bring it near proposed GST rates. But elections are near.
• Home Loans below 9 lakhs may get extra interest subsidy. Elections again?
• Time is ripe to come out with a Social Security System covering everyone. The government has been deciding to put more money in Aadhar or create a new system. Both ways, be ready to receive small amounts in your bank account. (I was shocked to receive Rs 12 when I got my car filled with petrol for Rs 1700/-. Really! FM came on TV to announce this relief?)
• LTCG (long term capital gain on investments in equity or equity mutual funds) may be trimmed and increased to 3 years. But it will be a dampener for markets but long term investors will rejoice as non-serious equity investor will move out or learn to wait.

 Do share what do you expect from this budget? Any special relaxation or you want a strong economy. Pls comment.

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