Wishlist for the Budget 2016

Here's what experts and taxpayers want from finance minister Arun Jaitley's third budget

Amajority of taxpayers want Finance Minister Arun Jaitley to raise the basic exemption limit as also the tax deduction under Section 80C.

More than half the 829 respondents to an online survey conducted last fortnight wanted the basic exemption limit to be raised to Rs 3 lakh. Another 43% wanted the limit to be linked to inflation and automatically raised every year. Only 5% of the respondents said the basic exemption and tax deduction limit should be kept unchanged. Taxpayers are divided over what kind of budget they want. Most taxpayers (45.4%) want a balanced budget that broadens the tax net without raising taxes, but some are looking forward to a growth budget (26.3%) while some others want a taxpayer-friendly budget (25%). Only a minuscule minority (3.3%) is willing to face a belt-tightening budget even though it may be harsh.

This minuscule minority may find its wish come true this year. A Rs 10,000 deduction translates into a loss of Rs 3,000 crore to the exchequer. The Seventh Pay Commission has already put pressure on the government's coffers so it is unlikely that Arun Jaitley will play Santa Claus this year. He is more likely to act like Robin Hood. Taxpayers want Jaitley to broaden the tax net to include rich farmers. Almost 40% also want a fourth tax slab of 40% for those earning more than Rs 40 lakh a year, while another 27% want an inheritance tax on wealth beyond a certain limit.

We reached out to experts from the financial services industry for suggestions on the budget. Most of the experts want the investment limit raised. "The Indian investor's equity allocation is very low and the budget should address this serious issue. We are hoping for a separate Rs 50,000 limit for ELSS funds," says A. Balasubrahmanian, CEO Birla Sunlife Mutual Fund. Others have sought new tax deductions and more options for retail investors. There are also suggestions for amending the tax rules for key goals such as retirement planning and education savings for children. Here are 10 such ideas that would be beneficial for investors and taxpayers.

Make NPS income tax free

The National Pension System (NPS) is a very good tool for retirement planning but the tax treatment is not favourable to investors. Right now, the scheme is treated as Exempt Exempt Tax (EET). "This is at a sharp disadvantage to the other major retirement products such as the EPF and PPF," says Dhirendra Kumar, CEO of Value Research. The budget should give EEE status to the NPS to encourage retirement savings.

Last year's budget had introduced an additional deduction of Rs 50,000 for investments in the NPS. Mutual fund want to be part of this as well. "The additional investing limit should also include pension products from mutual funds," says Chandresh Nigam, managing director of Axis Mutual Fund.

Remove RGESS restrictions

The RGESS was designed to attract small investors to equities, but its restrictive nature has prevented it from making a meaningful impact. The scheme offers deduction under Section 80CCG to 'first-time' retail investors with an annual income of not more than Rs 12 lakh. Also, the deduction is only 50% of the invested amount, up to a maximum of Rs 50,000. "The Budget should remove these restrictions and make the scheme more broad-based," says Prableen Bajpai, director of FinFix research and Analytics. There is also a need to encourage long-term investments in equities. "The Budget should introduce a deduction for SIP investors," says Manoj Nagpal, CEO of Outlook Asia Capital.

Tax benefits on home insurance

Several natural calamities damaged property and assets worth crores in different parts of India in recent years, but barely 1% of those assets were insured. "It is ironical that individuals who insure their factories and automobiles do not feel the need to insure their homes against calamities," says Tapan Singhel, managing director and CEO of Bajaj Allianz General Insurance. Singhel believes that if tax benefits are extended to home insurance, people will be more willing to buy this critical cover.
SOURCE - TOI

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