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Feb 22, 2013, 05.48 PM | Source: Moneycontrol.com

What to expect from the Union Budget 2013-14

We are only a week away from the Union budget 2013. Lot of expectation are build on this years budget considering it may be the last budget in the ruling party term and there is a need of the hour to reduce the impact of inflation on a common man pocket. Here are few of the expectations from the finance minister to consider in this year budget.

It’s only few days from now when our honorable Finance Minister will announce Budget 2013. Lot of expectations have been built up this time considering it may be the last budget in the ruling party term and there is a need of the hour to reduce the impact of inflation on a common man pocket.
Here are few of the expectations from the finance minister to consider in this year budget

1. Increase Sec 80C- This has been the biggest disadvantage to the salary individuals. Most of the tax benefits are available under sec 80C which is now overcrowded. Even the tax benefit on New Pension Scheme was introduced under this section and it provided very less motivation for the individuals. As salaries reach in the higher category this section gets covered by EPF contributions and there is hardly any scope for availing further tax benefit from most of the other investments/ contributions. Many of these like children’s tution fees or home loan principal repayment are part of individual life cycle where inflation is becoming a huge burden. This makes most of the benefits available under section 80C redundant. Thus, there is a need to increase the limit of Section 80C benefit.

2. Revise The Deduction Limits- Children Tution fees and conveyance has been one of the major contributor in rising household expenses. The education cost have rising by more than 10% and increase in petrol prices have been very frequent. This has increased the living expenses for a common man. But the benefit in the form of tax deduction has remained stagnant. The conveyance allowance at Rs 800 p.m.  looks a paltry sum now. Even the children education allowance has not been in line with inflation. The biggest disappointment is that it gets covered in a section which is overcrowded now and so there is hardly any relief to the people. Hence, there is a need to revise these tax benefits limits and give the benefit of inflation to most tax payers.

3. More Home Loan Sops for First House- Buying a dream house to live is a major concern now. Spiraling prices and rise in interest rates has made things difficult for first home buyers. The benefit of Rs 1.5 lakh interest deduction from housing loan repayment is not providing much relief when you consider the rise in housing cost. But there are more tax sops for second house and more giving rise to speculative investments. This has deterred many genuine home buyers. Hence, the limit on housing loan interest repayment should be raised to reduce the impact of rising prices.

4. More Tax Incentives- The budget 2011 introduced infrastructure bonds which provided additional tax benefits to investors. This was a simple products where the investors were receiving  fixed interest. The larger benefit was that it was available to all category of investors and the funds were being utilized for the right objective. Since infrastructure development is already on the cards of government, the tax payer is looking at similar products this year. The RGESS introduced last year pertains to only few category of investors and is much more complex. Also it is related to equity investments where most investors lacks knowledge and confidence. Thus infra bonds should be reintroduced to provide additional tax benefits.

5. Overhaul NPS & RGESS- NPS was launched few years back to reduce government pressure on retirement benefit payouts. Although it boosted for the lowest cost product in the world the tax incentives did not attracted investors. The investment contribution still falls under section 80C which most people are able to cover through other avenues. The maturity is taxable too which a lower incentive as compared to PPF. Further, RGESS introduced in 2012 caters to only a few section of people and the structure is not very convincing considering the risk associated with underline investment i.e. equity. Both these investments need a review. NPS tax advantage should be covered under different section to convince people on retirement planning. RGESS too need a restructuring widening the scope of not only people but underline investment also and making it more long term. ELSS has been a good example of tax saving equity product.

Many benefits have remained stagnant for many years and its good time that some of them are relooked in line with inflation. Although all may not be introduced in one go but even with some of the benefits the common man can find a relief in planning his/her finances.

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