The 2020 Union budget is expected to bring a lot of cheer for the 'aam aadmi'. For a start, there is hope of a big cut in the personal income tax or changes in the existing tax slabs. Currently, the highest tax rate kicks in for an income upwards of Rs 10 lakh — 30 percent. The widespread sentiment is that the rate is too onerous, and taxpayers would like the threshold to increase to Rs 15 lakh or Rs 20 lakh.
The other issue is with the current tax rates for incomes below Rs 10 lakh — 0 percent, 5 percent and 20 percent. There is no in-between 10 percent rate. However, that might change with this year's budget. The direct tax code, or the DTC, panel is believed to have submitted a report to the government recommending five slabs.
Further, the other important issue for the common man is Section 80C — where savings, investments, home loans reside. The limit for exemptions in Section 80C is set at Rs 1.5 lakh and has remained so for about the last half decade. Any hike in the limit and possible deductions will be a development keenly watched.
Pension is an interesting one. Over and above 80C there is an additional Rs 50,000 deduction for National Pension System (NPS) investment. Pension companies and insurance companies — which have pension products — are rooting for an additional Rs 50,000 deduction.
Currently, withdrawals from NPS accounts attract a 40 percent tax because of annuities. The stakeholders want tax exemption for the NPS just like the Employees' Provident Fund (EPF).
On to health insurance, the limits currently are capped at Rs 25,000 per year. It could be hiked. On housing, there is a lot of clamour. There is a loss on house property which is just Rs 2 lakh — which needs to be increased.
Lastly, the surcharge on the super-rich which was announced in the July 2019 budget could be in for a tweak or a partial rollback.