Union Budget 2017: What Taxpayers Can Expect From Arun Jaitley

Ahead of the Union Budget for 2017-18 on February 1, expectations have grown high that Finance Minister Arun Jaitley may provide income tax sops to revive consumption in the economy, which has been hit by Prime Minister Narendra Modi's November 8 note ban. Analysts expect major changes in the direct tax regime. Here are some of them:

1) Income tax exemption limit: The basic income tax exemption limit, which is currently Rs 2.5 lakh for people under 60 years of age, could be raised to Rs 5 lakh, a change which will place more money in the hands of consumers and give a thrust to demand and financial savings. A Deloitte survey of general taxpayers, working women, salaried employees, house owners and others reveals that 58 per cent of the respondents expect the general exemption limit to rise to Rs 5 lakh, while 28 per cent expect the limit to increase to Rs 3.5 lakh and only 14 per cent expect it to go up to Rs 3 lakh.

2) Exemption under Section 80C: Currently, exemption under Section 80C of the Income Tax Act is capped at Rs 1.5 lakh. Analysts expect the exemption limit under Section 80C to be hiked by Rs 50,000 to Rs 2 lakh. Given the increase in general income level and inflation, the current limit is very low, say tax experts.

3) Home loan interest exemption: Currently, home owners get a deduction of Rs 2 lakh per annum on interest paid on home loans. Analysts expect the limit to be increased to Rs 3 lakh to give a boost to the housing sector, which has been witnessing a demand crunch. Further, the housing sector has seen the maximum impact due to demonetisation. Finance Minister Arun Jaitley had last increased the limit to Rs 2 lakh from Rs 1.5 lakh in Budget 2014.

4) Deduction under Section 80TTA: Interest received on savings bank account up to Rs 10,000 in a financial year is currently exempt from tax. Analysts expect the exemption limit to be increased to Rs 20,000. Also, the exemption should cover interest earned on term deposits, they say. The Deloitte survey of taxpayers suggests that 74 per cent of the respondents are in favour of extending the benefit to time deposits and 54 per cent are in favour of increasing the limit to Rs 20,000.

5) Reimbursement of medical expenses: Currently, employers reimburse medical expenses (cost of medicine, doctor consultation fees, hospitalisation charges etc.) of Rs 15,000 per year. Taxpayers expect the government to double the limit to Rs 30,000 given the surge in medical expenses. The Deloitte survey says that 42 per cent of the respondents are in favour of this.