In this year Budget, we all have our own expectations. There are some difficult financial change taken by government such as demonetization and rollout of GST. And it has affected to common man and economy in India. From this budget, we expected some tax measures which will be last budget opportunity for existing government to offer relief to common taxpayers.
Reduce tax slabs for individual tax payers
Insurance is important to create secure future for their loved ones. Term insurance plans means life insurance. With this terms insurance, common man can insure his life and loves ones at low premium costs. You need to motivate people to invest in term plan and reduce their tax liability further.
Tax relief is one of main hope for individual tax payers. Under existing slabs, there is limited tax exemption to annual income of Rs 2.5 lakh. If tax exemption limits increase from Rs 2.5 Lakh to 3 Lakh so that it gives tax relief to small individual tax payers. On other hand following income groups are looking for fair cut in tax rates.
However, tax rates reduction will give you throwaway income in hands of taxpayers and reduce tax revenue figures for government. But in government revenue can be routed through an increase in tax deduction limits under section 80C of IT Act, 1961, which is another important hope.
Hike tax deduction limits under section 80 C
Tax exemption limits has set from many years and government need to revisit this limit. With rising prices and GST roll out, tax deduction limits need to be reworked. This budget is expected to make another increase in tax deduction limits from Rs 1.5 lakh to Rs. 2 lakh. Increasing limit for tax free investment and expenses under section 80 C will benefit middle class people and also tax payers falls in lower income slabs.
However, high tax saving limits under section 80C will enable taxpayers to save more under investment schemes like PPF, life insurance policy, NSC, fixed deposit, ELSS, NPS, etc out of their non-refundable income. Reduction in tax rates and increment in tax saving limits under section 80 C are basic expectations from this budget.
Raising the Section 80 D limits
In India, healthcare expenditures form a part of expenses of the people. As per data, 70% of healthcare expenses are out of pocket expenses due to lack of control of health insurance plan or schemes by their side. Health insurance plan offer tax deduction up to Rs. 25,000 for individual tax payer for payment of insurance premium for self, spouse and children.
Tax deduction limits offered for senior citizens under section 80 D are Rs 30,000. Taxpayer can encourage investing in health insurance plans by closing tax benefit limit under section 80 D. Under section 80D high exemption limit tax payers secure themselves from out of pocket expenses along with lowering their tax under section 80 D of Income Tax Act.
Fall in GST rates on insurance premium
Since GST set up, insurance cost has been increase. Tax rates on life insurance and health insurance premium is fixed at 18%. This budget must focus on reduction on GST rates on insurance premium to make it more affordable for common man. Life insurance plan is financial protection for family.
Similarly, health insurance is also very important consider medical inflation rate and lack of other health insurance schemes. Health premiums for senior citizen are quite expensive as far as affordability is concerned and adding with 18% GST makes it more expensive. In that case, health and life insurance premiums must fall in lower GST slab attracting tax rate of 5% to make premiums more affordable for lower and middle income group.
Make eco-friendly insurance pension plans
Mostly taxpayer focuses on other attractive investment avenues which keep main concern for investment in pension plans. Thus, retirement fund is important to have free post retirement life. As an individual you have to compare to other investment options available in market. Pension plans are taxable and is also treated as an income and taxable as per income tax rules.
However, there must be some relaxation on current tax rules for pension plans offered by insurers to encourage people towards such plans. Also, insurance, pension plans tax treatment is equal as compared to NPS because both avenues offer same objectives of retirement plan.
Taxpayer wishes to change in tax deduction limits under section 80 C and 80 D are key expectation from this budget and also it will reduce tax incidence on citizen. Government has to focus on special tax reforms to encourage people to invest in insurance products such as term and health insurance.