Why Salaried employee wants more tax exemptions?

The first fulltime Woman Finance Minister Nirmala Sitharaman is all set to announce the first annual budget of Modi government’s second tenure. Here we discuss why the salaried employees need more tax exemptions in the 2019 budget.

Looking at the budget announcement eagerly, the salaried middle class looks for increase in basic exemption limits, increase in the deduction towards home loan interest payments, and an easy tax filing process. Any tax relief that the budget will contain will leave the salaried tax payers with more money after paying off the taxes.

The interim budget of 2019 announced a tax rebate of Rs. 12,500 for the tax payers whose income was less than Rs. 5 lakh per annum. Nevertheless, the basic exemption limit was not changed. The middle class that was left out is expecting the Finance Minister to increase the basic exemption limit to 3 lakhs from the existing limit of 2.5 lakhs so that it will benefit even those taxpayers who are not eligible to claim the Rs. 12,500 tax rebate. Earlier, this limit found an increase from Rs.2 lakhs to Rs.2.5 lakhs only five years back in the 2014 budget.

The deduction limit under Section 80C of the Income Tax Act 1961 remains unchanged over the last 5 years. While the government is now looking forward to increase financial savings among the people and boost up the investments in the tax saving instruments, increasing the deduction limit under section 80C to Rs 2 lakhs from Rs. 2.5 lakhs can encourage the salaried class.

The healthcare expenses have grown alarmingly over the recent past. The medical expense reimbursement given to the middle class has also been included into standard deduction. Hence increasing the deduction under 80D from Rs. 25,000 to Rs. 50,000 can bring in some relief to the tax paying salaried class.

Individuals saving for their retirement are eagerly seeking to increase the deduction for contribution to the National Pension Scheme (NPS) from Rs. 50,000 to Rs. 1,00,000.

The salaried class is also expecting the deduction on housing loan to be increased from Rs.2 lakhs to Rs. 3 lakhs. The Government has already initiated the ‘Housing for all by 2022’ Scheme. Hence strong expectations are seen amidst the middle class that the budget 2019 might increase the deduction for home loan interests.

The other expectations the salaried and the middle class have in the budget 2019 include digitalizing the processes of applying for Tax Residency Certificate, quicker processing of the applications for transfer of PAN from one to another jurisdiction, income tax returns and refunds.

The big goals in front of the Narendra Modi government’s second term are enhancing the consumption, creating more employment opportunities and boosting up the economic growth. To achieve these ends, the government will have to bring in a considerable relief to the salaried middle class. Hence, expectations are on the rise to see that the budget 2019 contains aspects that will bring the much needed relief to the salaried tax payers.