#Budget2017: Some Modifications To Tax Slabs, Middle Class Wanted More

The Union Budget 2017-18 hasn't turned out to be the freebie-bonanza many expected from Arun Jaitley, however it did touch a segment of taxpayers. Of the 3.7 crore individuals who filed tax returns in 2015-16, 99 lakh declared incomes below the exemption limit. In an attempt to bring more money into the hands of prospective buyers, the tax slab has been revised. Previously, those earning anywhere between Rs 2.5-5 lakh annually had to shell out 10 per cent towards tax. Now, the tax pressure has halved as this slab will be charged at five per cent. This means, the tax saving for an individual amounts to Rs 12,500 per annum.

Those with incomes in the range of Rs 50 lakh to Rs 1 crore per annum would be liable to pay a surcharge of 10 per cent. Other segments, too, shall avail of a uniform benefit of saving up to Rs 12,500 per annum.

No additional tax benefits on housing loans have been introduced. After a series of announcements about demonetisation, GST and aim to transform, energise and clean India, perhaps tectonic shifts in the tax slabs were expected too. It could have been a spur to the otherwise crawling demand in the Indian housing market. However, the little that has been introduced is nevertheless, positive. An infrastructure status to the affordable housing means speedy approvals and sanctions.

What was missed?

As demands and suggestions poured across government websites and social media, one of the most important announcements that prospective home buyers waited for, is of housing costs made more affordable.

Here's what could have brought about a big change:

• Home buyers forced to settle for lower tax benefits due to delays at the developer's end craved attention.

• The maximum amount eligible for tax deduction is Rs 1,50,000 and is bludgeoned with other deductions such as tax saving fixed deposits, equity oriented mutual funds, national savings certificate, senior citizens saving schemes etc. A separate cap for housing loan could have been encouraging.

• Section 80C deductions from Rs 1,50,000  to Rs 2,00,000 were a justified need. It did not find a mention in Arun Jaitley's speech either.

• Tax deduction for interest paid on housing loans should be increased to Rs 3 lakh. If such deductions are in sync with inflationary levels, it would have made more sense.

• House insurance premiums should have been allowed for deductions too. At a time when poor urban planning or accidents such as fire can cause harm to property, a second home may be out of reach for many. This step could have been very encouraging.

Housing related policies should be in sync with the demands of citizens. Here's why:

• Tax deduction limits should be framed based on the property values in cities because as far as data suggests, most metros today are unaffordable for an average salaried home buyer. The peripheries are increasingly becoming a choice because the prime locations are saturated or priced disproportionately when compared to salaries.

• Only 24 lakh tax payers have declared incomes above Rs 10 lakh per annum. The population of India stands at 125 crore. It is high time that the government writes favourable policies for the have-nots.

• In order to cater to a growing middle and upper middle classes who base their decisions on property values, developers took to smaller homes because they couldn't control costs. Meanwhile, flexible payment plans, subvention schemes, discounts, assured rentals, freebies too made their entry. However, largely these failed to restore the momentum even during the festive season.

Despite the announcements by many banks about lowering their lending rates, the market has not shown visible enthusiasm about buying a home. This could be for two reasons- one, most optimists expected further sops in Budget 2017 and secondly, perhaps it is not enough to boost sentiments. SBI, Union Bank of India, PNB, ICICI, Kotak Mahindra, Andhra Bank, Oriental Bank of Commerce, Indian Overseas Bank, Citi India, Syndicate Bank, Dena Bank and even the youngest among them, Bandhan Bank has slashed rates. The effect of this drastic cut is yet to be seen. Rates at SBI for example, are at a six-year low. Meanwhile, interest rate subventions for urban areas are expected to trigger the market. Budget 2017 emphasised on the banks' capacity to lend at reduced rates owing to demonetisation and greater inflow of cash into banks. However, it did not introduce any additional incentive to home buyers on the basis of their incomes. So those looking out for more may now converge their energies into how to make the most of what is available.

Perhaps, the crawling demand will now garner momentum and affordable housing may be the new flavour of Indian cities.

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