Expectations! A lot more is awaited from Budget 2019

As it regularly happens at this time of the year, the media is abuzz with Budget expectations and taxpayers – salaried and entrepreneurial - have high hopes that the new Budget will help them save on their income taxes. Here are some of the expectations regarding the same.

An increase of HRA limits in Tier II cities

Indian Income Tax provisions consider only Mumbai, Delhi, Kolkata and Chennai to be metro cities and allow 50% of salary to be claimed under the House Rent Allowance (HRA). With increasing house rent in cities like Pune, Bengaluru, Hyderabad and Gurugram, it is expected that the new Budget will add them to the list of metros so that the residents of these cities too can claim the same benefit.

Increase in the limit of deduction under section 80C

The last time the 80C investment limit got revised was in the 2014-15 Union Budget from Rs 1 lakh to Rs 1.5 lakh. With rising income levels and inflation, this amount is no longer enough to save adequately on taxes. We hope that the new Budget will revise this 80C deduction limit to Rs 2 lakh.

Reduction in the tax rate for partnership firms/LLP

The then finance minister Arun Jaitley had assured during the Budget presentation in 2015 that he will reduce the corporate taxes to 25% from 30% in the subsequent years.

And in 2018 he did cut the rate for specified companies in terms of the turnover, but this tax relief was extended only to registered companies and not partnership firms and LLPs. This year the LLPs and partnership companies are very hopeful of receiving the same benefit.

Clarification on LTCG on listed securities

Budget 2018 has levied 10% LTCG tax on gains made from equities if the gains exceed Rs 1 lakh. Also, any kind of switch from growth option to dividend option or vice-versa is subject to long-term capital gains or LTCG tax.

However, the switch within the same scheme i.e. from debt to equity in case of ULIPs and NPS or re-allocating assets between them is not taxed.

It is hoped that there will be some clarity on this and switches made within a scheme will not be liable to LTCG tax.

Extend interest relief on housing loans

Home loan is one of the highest big-ticket loans a person is likely to avail in his/her life. Having tax relief on the interest component of just Rs 2 lakh doesn’t seem enough anymore. Home buyers are hoping for at least Rs 2.5 lakh deduction on the interest component of the home loan. Individual taxpayers are hopeful of the additional Rs 50,000 benefit.

New NPS rules to be effective after the Budget 2019

The new NPS rules released by the government last month will come into effect once the Budget is presented on February 1. There is a 4% increase (from 10% to 14%) in the government’s share of NPS contribution for employees of the Central Government employees. In addition, the NPS withdrawal will be made tax-free up to 60%. The rest must be compulsorily invested in annuities. It is expected that these provisions will be applicable to all taxpayers and not just central government employees – it will definitely boost NPS as a popular scheme for retirement planning.

(The writer is Founder & CEO of ClearTax)