The Union Budget 2020 is just round the corner. The Finance Minister Nirmala Sitharaman will present the Union Budget 2020-2021 on February 1st 2020 which is a Saturday. This is the first time that the Union Budget would be presented on a Saturday. The stock markets would be open on February 1st 2020 which is a Saturday.
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I’m sure you are keen to know what the Union Budget 2020-2021 holds. You must be already having the wish list ready. Let’s get an idea on what the Union Budget 2020-2021 holds and can your wish list be met.
The middle class in India has less income and a huge tax burden. If you (a normal citizen under 60 years) earn between Rs 2.5 Lakhs to Rs 5 Lakhs a year, you pay income tax at the rate of 5%. However, if you earn between Rs 5 Lakhs to Rs 10 Lakhs; you pay an income tax of 20%. This steep hike from 5% to 20% is really harsh.
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If you have annual income between Rs 5 Lakhs to Rs 10 Lakhs there’s good news. You could be taxed at 10% instead of 20%. This could come as a huge tax relief, especially as CPI inflation for the month of December stands at 7.35% which is at a 5-year high. Out of 5.52 Crore taxpayers in the Financial Year 2017-2018; more than 27% had income between Rs 5-10 Lakhs. So, around 1.5 crore taxpayers could enjoy a lower tax rate of 10%.
An investment in NPS enjoys a Rs 50,000 a year tax deduction under Section 80CCD(1b). This is in addition to the Section 80C tax benefit up to Rs 1.5 Lakhs. You could see the tax benefit under Section 80CCD(1b) doubling from Rs 50,000 to Rs 1,00,000 a year.
The Government wants to promote investments in mutual funds across the country. The highly successful program Mutual Funds Sahi Hai is promoting awareness on mutual funds. Equity is being promoted as an inflation-beating investment in India. The Government had introduced LTCG tax on equity funds on gains of over a lakh in Union Budget 2018-19. This came as a shock to the several investors in the equity markets. The Indian investor has found taste in mutual funds and prefers to invest through SIPs. Mutual Fund SIPs took off after demonetization. In recent times though, many investors are exiting mutual funds. The Government has to do something about this. Why not remove LTCG tax on equity funds and bring all the investors back?
The insurance penetration in the general insurance sector was just 0.93% in 2017. Something has to be done to improve the poor insurance penetration in India. Why not introduce a tax deduction on home insurance?
Families today spend a lot of children’s education. Worse, education inflation is rising and is second only to healthcare expenses. Families break up emergency savings for children’s education. They might even dip into retirement savings.
Why not introduce a separate deduction for education savings giving the children of India a bright future? Yes, tuition fees along with a number of other financial instruments enjoy the Section 80C benefit. This limit is too small. A separate deduction for education savings is a must.
The Government aims to promote the low cost and affordable housing in India. Just take a look at Section 80EEA, where if you are a first-time homebuyer, you enjoy an additional tax deduction of Rs 1.5 Lakhs on home loan interest. This is over and above the Rs 2 Lakhs a year under Section 24. The home loan must be up to Rs 35 Lakhs and property value must not exceed Rs 45 Lakhs. Section 80EEA must be increased over the current Rs 1.5 Lakhs in the Union Budget 2020.
You enjoy a tax deduction on home loan interest under Section 24 up to Rs 2 Lakhs a year. This tax deduction was last revised in 2014. As property prices rise, even a 2BHK apartment can cost Rs 60-70 Lakhs. This Section 24 deduction must be doubled from the current levels.
Life Insurance penetration in India is a mere 3.69%. There’s a need to boost pure life insurance plans like term life insurance in India. A separate tax deduction of Rs 10,000 to Rs 15,000 a year for term life insurance (Other than the Section 80C tax deduction) is a must.
In addition to this the Section 80D tax deduction on health insurance premiums for self and family must be hiked from Rs 25,000 to Rs 50,000 a year. For senior citizens, the tax deduction limit must be hiked from Rs 50,000 to at least Rs 75,000 a year.
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