KPMG: What salaried people can expect from Budget

New Delhi: Individual looks forward to Budget with just one question – will it increase my 'take home pay'? Let's look at the most anticipated changes in this year's Budget which will have a direct impact on this question.

Increase in slab rates

The rationalisation of tax slabs in line with the proposed Direct Tax Code (DTC) would help the common man. Increase in the minimum exemption limit to Rs 2,00,000 and raising the highest tax bracket to Rs 10,00,000 would help in reducing the tax burden for the common man.

Stepping up the exemption on allowances

As per current tax laws, children education allowance, hostel allowance, transport allowance are tax exempt up to a nominal amount of Rs 100, Rs 300 and Rs 800 per month respectively. These limits have not changed in a decade and it's time that these are revisited. The new limits can be set at Rs 1,000 for children education, Rs 1,500 for hostel allowance and Rs 4,000 for transport allowance.

Raising the reimbursement limit for medical expenses

Salaried individuals are currently entitled to a tax exemption of Rs 15,000 on medical reimbursement. In view of the spiraling medical costs, increasing this limit to Rs 50,000 would provide some respite. This is also in line with the limits provided in DTC.

Restoring standard deduction for salaried individuals

The standard deduction allowed to salaried tax payers earlier should be restored. There is a deduction available for expenses incurred earn business / professional income. Therefore, reintroducing the standard deduction will bring the salaried individuals at par with the other class of income recipients.

More investments and more deductions

An increase in the Rs 1,00,000 limit of Section 80C to Rs 3,00,000 would definitely help in mobilisation of savings and forced investments in various income generating options.

Likewise, additional deduction of Rs 20,000 for investment in infrastructure bonds may be increased to Rs 50,000 in the upcoming Budget.

Exemption for interest payment on housing loan

Over the years, the home loan rates have increased considerably. However the tax exemption for interest payment (for self occupied property) has remained stagnant at Rs 1,50,000. Raising this limit to Rs 3,00,000 will be a welcome change in view of the rise in housing cost and interest rates.

Amidst all the hype surrounding the Budget, we hope that Mr Mukherjee lives up to the common man's expectations.

Vineet Agarwal is Director–Tax at KPMG India