#Budget2017: Tax Exemption Upto Rs 4L Unlikely, Citizens Wait For The Final Verdict
As we await Budget 2017, which will be announced on February 1 by Finance Minister Arun Jaitley, there is a widespread understanding that the tax exemption limit may be altered and made Rs 300,000 per annum for all under the age of 60 years. If the actual wishlist is looked at, the salaried class in India would want to change the existing slabs and the peak rate of 30 per cent ideally be applied to those earning Rs 20 lakh and above. As of now, those earning Rs 10 lakh and above are taxed at this rate.
The numbers internationally
At this juncture, it is interesting to note the peak rates applicable across other countries. As per studies, the global peak marginal tax rate on an average stands at 31.12 per cent. The Organisation of Economic Cooperation and Development (OECD) that comprises of 35 of the world's most developed countries (contributing more than 60 per cent of world's GDP) pays an average peak rate of 41.5 per cent. But, the good part is that in countries such as Finland, there are no tuition fees for universities. In Sweden, too, PhD degrees are free and thus, higher taxes. Besides, there are retirement pensions, sick leaves, parental leaves, universal healthcare and childcare, and education through to college level. It could take up 80 per cent of the income, but, citizens are happy with what they get in return. Belgium boasts medical, unemployment insurance, family allowance, retirement benefits and disability payments in the event of illness.
On the other hand, in India, those who earn Rs 10 lakh are taxed at 30 per cent and out of the rest they need to manage a home, educate their children, buy a home for social security, take care of ageing parents, get children married and pay various other taxes if one plans on an entertainment tour or a casual dinner at a restaurant. Although the cost of living is much higher in the United States, a head of the household whose income is taxed at 28 per cent usually earns between Rs 89 lakh to Rs 1 crore, annually.
Expectations from Budget 2017
Union Budget 2017 could be a game changer for home buyers if it eases tax pressure and changes the tax slabs favourably, which has remained static for the last three financial years. A higher net disposable income would be great news for home buyers. In a country where only three per cent of the populace files income tax, a higher exemption slab could be beneficial. Naturally, home purchases that have been looking down over the last three years would see good times ahead.
However, experts believe that exemption till Rs 4 lakh may not be a possibility because it would then oust a considerable number of tax payers. In 2012-13, a total of 19.18 lakh tax payers in India were earning anywhere between Rs 2.5-3.5 lakh per annum. At a time when the government is looking at widening the tax base, this does not pose to be a possibility, although, some relief up to Rs 3 lakh is anticipated.
"We expect some confidence-boosting measures in the upcoming budget, which will put more money in people's hands, and that itself will bring back home sales to pre-demonetisation levels. Under that, specifically, some cut in the tax rates for middle-income groups will be the most awaited measure. For the long-term, cuts in income tax rate, and possibly in stamp duty for home registration could be measures that may help the real estate industry in getting a jump-start," says Sunil Mishra, Chief Business Officer, PropTiger.
Some benefits of a favourable movement in the tax slabs:
The last budget season gave an added exemption of Rs 50,000 for first time home buyers provided the loan amount was not more than Rs 35 lakh and the total cost of the house did not exceed Rs 50 lakh. Can Budget 2017 be better for taxpayers?