A large section of taxpayers is hoping that the Finance Minister Nirmala Sitharaman would revise the personal income tax slab in Budget 2020.
The budget hysteria, for years, has continued to revolve around deductions and income tax exemptions. This time too, expectations are sky-high on increasing the exemption limit under 80C. However, the current economic turmoil in the country has put things on a cliffhanger for now. Nirmala Sitharaman, the Finance Minister, has a tough task at hand with financial planners vying for an increase in the personal income tax deduction limit and more. In an exclusive conversation with India TV Digital, Former Finance Secretary CM Vasudev delved upon the upcoming Budget amid India's current fragile economic conditions.
No fiscal space to increase deduction limit under 80C
"I don't believe there is fiscal space to increase the limit under 80C." The limit of deduction under section 80C witnessed its last increase in 2014 when it went up from Rs 1 lakh to Rs 1.5 lakh. Under section 80C, an individual or a Hindu undivided family (HUF), is allowed a deduction from gross total income with respect to the sum paid or deposited in certain specified schemes and specific expenditures. Some of the popular investments eligible for deduction include life insurance premia, contributions to Employees' Provident Fund (EPF), payment of tuition fees, repayment of the principal amount of housing loans, Public Provident Fund (PPF), and so on.
LTCG Rate cut not fiscally prudent
Vasudev, who was once at the helm of the country's economic affairs, believes that a rate cut in the long-term capital gain (LTCG) tax may not be fiscally prudent. "It is also not a good idea to tinker with tax provisions every year. Stability in tax regimes is very important for the business sentiment."
Stimulating demand should be on top of Sitharaman's agenda
Budget 2020 is being framed in a very difficult economic environment, the former finance secretary said, adding that Sitharaman will have to prioritise her objectives. "Growth rate is down, inflation is creeping up, investment rate and consumer demand are at an all-time low and fiscal deficit is under severe pressure. The Finance Minister has her task cut out. She has to prioritise her objectives. Stimulating demand should be at the top of her agenda," CM Vasudev told India TV Digital.
CONCERNS OVER FISCAL DEFICIT: WHAT GOVERNMENT NEEDS TO DO
Support to farmers
Concerns over fiscal deficit are not new. The fiscal deficit is set to breach the budgeted target of 3.3 per cent for the current fiscal. Talking about the same, CM Vasudev suggested that demand stimulation in sectors which have large pent up demands can pay quick dividends. "For this, To increase the amount of direct income, support to farmers should be considered."
Prioritising infrastructure
Vasudev also said the Modi government needed to prioritise the infrastructure sector for stimulating public investment. "Opportunities for extra-budgetary investments by PSUs in infrastructure sector should be encouraged," the former finance secretary told India TV Digital.
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