The Finance Minister tabled the 3rd Budget of the NDA in the leap year, with a lot of expectations riding on it for the aam aadmi. Arun Jaitley in the speech made a categorical mention of the nine pillars of the economy, with one pillar being benefits to the small tax payers. While the statement of providing benefit to the small tax payers leaves a strong punch, in substance if you dissect the reforms, the so-called benefits cover only a handful of the population.
Jaitley has proposed to increase the limit of rebate from Rs 2,000 to Rs 5,000 with regard to taxpayers earning salary income up to Rs 5 lakh. The proposed change is likely to cover only about 2 crore of the population which is almost negligible. In a similar manner, individuals who stay in rented houses and do not receive any HRA allowance from the employer are proposed to get an additional deduction for the rent so paid by 3,000 per month, thus raising the bar from Rs 2,000 to Rs 5,000 per month.
A lot was being said and one could hear murmurs that the overall exemption limit may see a change, the medical reimbursement with the ever-rising medical costs may see an overall change in the limit and more so the 80C limit may further be enhanced. It seems all of this was just a figment of imagination, a mere hearsay that was doing the rounds.
While the expectations once again fell through for the common man, to top it all, there are further proposals to levy tax on the upper middle class “janta”. One such big move is to tax the dividend at 10 per cent on a dividend earning of above Rs 10 lakh per annum which the so-called upper middle class earns by investing in SIP on a monthly basis in various equity schemes. The increase in the surcharge rates is another dent on the pocket with the overall rate being raised by a further 3 per cent from the earlier 12 per cent.
Another big ticket item that the FM initially proposed as part of the Finance Bill was the taxability of the Employee Provident Fund Scheme which was a compounding multiplier for large part of the population. The proposal was to tax the contribution made by employer in excess of Rs 1,50,000. Further, the corpus that gets created post April 1, 2016 (not retrospective) to the extent of 40 per cent is being proposed to be exempted and the balance would be taxable leading to the same amount being doubly taxed. The proposal so initiated by the FM met with a lot of criticism from people at large, thus leading to the FM rolling it back. This came as a big breather to the common man who would have suffered if the proposal would have not been rolled back by the government.
As regards the deduction in respect of loan taken for residential house property purchased during the tax year 2016-2017, the provisions seem to have been made more stringent with the overall limit proposed to be reduced from Rs 1 lakh to Rs 50,000.
Introduction of the Black Money Bill was the right step to bring to light the funds that were kept hoarded away. To take a step further, the FM has proposed the Income Declaration Scheme to provide an opportunity to the persons who have not paid full taxes in the past. The scheme over all comes subject to some conditions related to it, but gives another window to pay up by just paying a price of 45 per cent of the undisclosed income. To cut the long story short, this is certainly not a common man’s budget. With almost negligible benefits doled out to the taxpayers, the proposals seem to nowhere meet the expectations of the common man.
olmdesk@outlookindia.com