Union Budget 2015-16:-- Neither Drastic nor Fantastic

The Union budget is on the expected lines where  the finance minister did not touch the tax rates and slabs maintaining the status quo for the most part. While this was widely expected as we had mentioned in article on the expectations from the budget, it can be termed at most insipid from the point of view of a salaried individual.

There are some unexpected good moves like the phased reduction of the rate of corporate tax to 25% over a period of 4 years and diverting 62% of the tax receipts to the state. With this move the finance minister has increased the responsibility of states in terms of public spending.

While nothing much has been done on the front of individual taxation and the limit of investment under section 80 C has been kept at 150000, the limit for deduction from taxable income of   premium paid on health insurance has been increased to 25000 for individuals and 30000 for senior citizens under section 80 D. Tax free transport allowance which has been hovering at Rs 800 has been thankfully increased to 1600 per month. No other exemption or deduction has been tampered with as the time lag between the last budget and this budget has been barely 9 months and many limits had been increased by the finance minister last time around.

The replacement of Wealth tax with the 2% surcharge on the Super rich (Taxable income > 1 Cr) would yield additional revenues of 8000 cr to the government and would save the hassle of valuation and measurement of wealth every year.

For a resident individual while the relief in tax  is not visible there  is an additional burden in the form of increased service tax from 12.36% to a lump sum rate of 14%, this would certainly  have an impact on the  wallet of the common man as there are hardly any services which do not come under the net of Service tax and we  only can  hope that when the GST will come into play in 2016, this additional burden would be rationalized.

There has been intent on the part of the government to counter the menace of black money by putting in place stricter legislations including the scope for rigorous imprisonment for stashing money abroad.

There has been a focus on job creation and encouragement to the entrepreneurship with initiatives like SETU ( Self Employment and Talent utilization) and more could be expected in future.  Quoting JAM ( Jan Dhan yojana, Aadhar and Mobile) in economic survey as a means of Financial Inclusion could have far reaching effects

Thus while this budget  falls short on instant gratification for the common man, One hopes that the measure initiated are in the right earnest and fulfill the objective of sustainable and inclusive growth and development in the targeted time frame.

Budget 2015 -16: What to  Expect

So the rituals begin and we are in the budget week when every tax payer ( Aam Aadmi) looks at the finance minister with a lot of hope and this year the expectations are even more owing to the following factors.

1.     This is the first full fledged budget of the  New incumbent (  NDA Government) which stormed into the corridors of power riding on the slogan Sabka sath   Sabka Vikas,  now is time for them to walk the talk and induce the  much needed confidence in the  industry as well as general public.
2.     The budget comes on a close heels of a severe defeat in the Delhi Elections for the ruling party, the first since the general elections in may 2014 and the government needs to send a strong message through this budget  that it is still strong  on the policy front and does not lack political will to carry out the strong measures required  for the growth  and development.

While these are the factors which we believe will be the major forces determining the direction of the budget, it should also contain the measures which will give fillip to the economic growth leading inclusion of all the sections of the society.

On the front of personal finance, there are expectations on many fronts as mentioned below

1.      To  raise the basic exemption limit to Rs  300000/- , while this would be a populist measure , this will pressurize the exchequer more than other measures

2.      Another expectation could be raising the limit for 80 C investment to Rs. 200000, although it was  increased to 150000 last year only, there are little chances, it will be done again so soon

3.      Deduction from Taxable Income on interest payment of housing loan  (u/s 24) was increased to 200000 in the last year’s budget , and it would be a bit too Optimistic to expect it to increase this time also.

4.      While 80 D which provides Deduction on the premium paid for the self and Senior citizen parents  till the limit of 15000 and 20000 respectively , these limits can be expected to be revised as they have been for some time

5.      Some of the Allowances and reimbursement need to be looked into , like the tax free transport allowance is Rs 800 per month would make for taxi ride for a single day in some cases, similarly the tax free Medical Reimbursement of Rs 1250 per month seem very little looking at the cost of medicines and the cost of medicine consultancy charges, Tax Free Child Education Allowance of Rs 100 per child per month looks inadequate .

6.      Short term Capital Gain Tax on Sale of Equity Shares: While there have been voices on changing the definition of the short term for this purpose, we do not foresee this coming in the near future, while reducing the short term capital gain tax rate to 10 % would be a welcome move for the equity markets.

7.      Securities Transaction Tax:  There  has been demand to abolish this tax which is charged at a rate of 0.1% of the transaction value in the equity market. It is expected that this move might encourage retail participation in the market

In addition the finance minister will have to show intent by moving forward in the matters of GST, Direct Tax Code and other such forward looking measures which could not see the light of the day in the tenure of UPA government.

Another measure which government should set as target would be the ease of doing business in India, Entrepreneurs are an integral part of any developing and vibrant economy and the success which they achieve depends on the economic and regulatory environment in which they operate in their home country.

Targets like containing fiscal deficit to an acceptable limit needs to be achieved, while the government has the cushion of falling crude prices to ensure the same, the same should not be done at the cost of general public.

Thus our expectations are simple, friendly and simplified tax regime, more jobs for the youth , more opportunities of entrepreneurs, more amenities for the public and more growth for the country and the first Step in the direction of “ Sabka Sath Sabka Vikas”