What can Arun Jaitley do to help your budget?
- Allow additional deduction on education loan
If we get deduction on principal repayment of home loan then why can’t we get it on education loan? This small effort on the part of our finance minister can help in raising the literacy rate amongst the ambitious youth. Currently we get a deduction of the entire interest payment portion. An entire deduction of the amount of repayment will help especially those who need to avail huge loans in order to pursue higher education overseas.
- Widen the tax base
Tax base of our country is significantly low. Only 4% of citizens pay their taxes which puts unnecessary financial burden on them. Mr. Jaitley must find out ways to widen the tax base of our country.
Some measures could be in the form of more awareness campaigns how taxes help in nation building, providing some form of social recognition to the taxpayers, and maybe even routing some social benefits through the tax filing mechanism like what US has done.
- Encourage investments by NRIs
NRIs earn a lot of money and invest a lot of money in India but, there is huge scope for increasing investment. Government finance department can offer some tax benefits to encourage investment in infrastructure and equities.
- Too many taxes in real estate
Many reforms have been made by government to increase sales in real estate market. However, people still find it difficult to buy a home even if they get a home loan simply because there are just too many taxes and fees associated with it. So we expect that our finance minister brings some reforms to make owning a house easy for a common man. Speedy clearance of the GST bill can be one of the measures that might reduce the multiple taxes and ease the burden.
- Increasing the cap on 80C
Currently, there is a cap of Rs. 1,50,000 for investments under section 80C for salaried class which discourages further savings which are capable of saving more. Increasing the cap can bring more money in circulation in the economy with banks, insurance firms and mutual funds.
- Women centric measures to encourage women in workforce
There are many expenses that a working woman needs to incur when she steps out and take the financial responsibilities. Expenses such as day care fees, expenses on health care specific to women should find a place in in the deductions / exemptions list. Single mothers can also look for increased exemption limits up to Rs. 5,00,000 to provide them the much needed breather.
- Increase in the HRA deduction
HRA deduction calculation is based on the amount which is least of Rent paid minus 10% of basic salary, actual HRA received and 50% of basic salary if you stay in a metro city or 40% if you stay in any other city. Currently metro cities include Delhi, Mumbai, Chennai and Kolkata.
The limit of 50% of basic salary should be extended to other major cities where rent has inflated to a high price like Bengaluru, Pune, Gurgaon, Noida, Hyderabad etc.
Moreover the deduction of rent of Rs. 2,000 under section 80EE for rent paid where HRA is not a part of the salary needs to increase since this is too less a deduction in today’s times.
- Make NPS Exempt – Exempt-Exempt scheme
NPS is a EET scheme as of now since the investment is taxable on maturity. We need to make it EEE where the maturity proceeds are also exempt from tax. This would make it a more viable investment option. This option will make it a more attractive investment option for the private sector employees who have limited scope of having a steady retirement income.
These are our recommendations to our finance minister. We would love to hear your expectations in the comments below.