The Union Budget 2020 is going to be presented to the citizens on 1st February. There are so many rumors on the Internet and media regarding so many things concerning the way businesses will function and personal tax front. Let’s discuss it all in this blog.
The yearly or fiscal budget is that time of the year when the citizens of the country get some expectations from their Government regarding the personal tax front increases. Recently, we saw a steeping cut in the tax rates of the corporates raised expectations of the customers regarding the personal tax.
We are also informed that the Government aims to promote local goods and services leaving more disposable income in the hands of individuals that may well be evaluated by the finance minister (FM) as one of the measures of achieving this objective.
The Union Budget for the FY 2020 is to be presented to the people of India on 1st February 2020. It is going to be a very special day in the history of India’s Finance Records where a Budget was presented on a Saturday when the market would be closed.
This year’s union budget is going to be a huge step for India and the Finance Minister as the country is going through a huge Industrial slowdown, the demand-supply got reduced and GDP growth that’s steeped down to a 5% low.
So, let’s discuss some of the key expectations for the personal tax front that the Government may consider are:
The current income tax slabs and rates to be changed
Currently, the individuals who are earning up to INR 2.5 lacs rupees are exempted from paying tax. Those who are paying between 2.5 lacs to 5 lacs have to pay a 5% tax. On the other hand, those who earn between 5 lacs to 10 lacs will fall under the 20% slab and those who pay more than 10 lacs will fall under the 30% slab.
It is reported that these slab rates are going to be changed in the upcoming union budget in 2020. The new slabs are going to be Rs. 2.5 lacs to 7 lacs, 7 lacs to 10 lacs, 10 lacs to 20 lacs, 20 lacs to 10 crores and above 10 crores.
Increased relief under section 80C
Considering the various common tax-saving investments/expenditures such as employee provident fund, public provident fund, principal repayment of housing loan, children’s tuition fee and national savings certificate, they are set to Rs. 1.5 lacs per annum. And under the same, a deduction is to be expected. For the last five years, the limit has remained the same. And looking at the current scenario, the way in which the economy has been behaving, the Government may end up increasing this limit to Rs. 2 lacs for many reasons like providing impetus to consumer spending to spike demand and also encourage individuals to meet their long-term savings goals.
Other than this, it is also expected that the Government may also introduce another enhanced limit for certain high-value transactions in cases like children’s education and tuition fee.
Now when we talk about increasing the Rs 1.5 lacs limit to Rs 2 lacs, it will become a big relief to the citizens. But the main question is whether it would be implemented the way it should be. The answer to this question would only be given on the union budget presentation day.
More reduced interest paid on housing loans
Currently, the income tax deduction when it comes to interest paid on a home loan on a self-occupied land or property is claimable up to Rs 2 lacs per annum. Most of the buyers and those who wish to apply for a housing loan find it quite low with regards to the cost of capital. And the way, the price of the capital has been increased from the last couple of years despite the decreased repo rate by the Reserve Bank of India, the Rs. 2 lacs amount seems negligible.
With the beginning of FY 2020, relief was allowed to taxpayers wherein they can hold two self-occupied house properties and no notional rent would be apportioned towards the second housing property.
Many people, home buyers, and housing loan applicants were worried about the same. Hence, it is expected that the Finance Minister may soon do something for this and the amount shall be doubled from Rs. 2 lacs to Rs. 4 lacs.
Extension of the additional deduction for affordable housing
There is an additional deduction of up to Rs. 1.5 lac per annum was introduced w.e.f., FY 2020, for first-time homebuyers with regards to the interest payable on a housing loan sanctioned during the period of 1st April 2019 to 31st March 2020 with the on-paper valuation of the property not exceeding Rs. 45 lacs.
A lot of Real Estate professionals and agents argued that the stated threshold is very low as compared to the price of the property purchased in the top tier cities.
Along with this, one of the set forth conditions to avail such deductions is that the loan shall be sanctioned between the period of 1st April 2019 to 31st March 2020, which is during the current financial year only. Thus, it contradicts the mission of the Government, “Housing for all by 2022.”
Capital Gains Tax and Govt’s target
The Government, as per the Finance Act, 2018, introduced the Capital Gains Tax at the rate of 10% on the sale of the long term listed equity shares and equity-oriented mutual funds if the gains exceed Rs. 1 lac, where long term stands for the time period greater than 1 year. The same Long Term Capital Gains (LTCG) were earlier exempted from tax.
If the Government wants to make India an attractive destination for more investments by foreign sources or even our own sources, it should definitely reconsider the LTCG tax on listed equities. Along with this, the Government may reconsider increasing the minimum holding period of the asset to something more than one year (say two years or three). Therefore, it ensures that the funds remain in the system for more than a year or longer.
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