- Date : 26/02/2016
- Read: 4 mins
With less than 3 days to for the announcement of the 2016 government budget, taxpayers are itching to know what’s in store for them.
The 2016 Union Budget will be announced by the Finance Ministry of India on the 29th of February, 2016. Here are 6 major changes we can expect to see:
- Falling crude oil prices may increase the tax exemption limit
If crude prices fall, our import bill would reduce, allowing for lesser pressure on our fiscal deficit. This would result in a reduction of the subsidy on LPG and kerosene.
The government could either redirect this benefit to growth activities in the near future, or use it to give away tax exemptions to the general public.
Minimum exemption limit of personal income tax is currently Rs 2,50,000 and the Section 80C limit is Rs 1,50,000.
- Salaried employees may get a deduction for expenses
Salaried employees, who constitute a large portion of the Indian tax payer group, have been awaiting a deduction for expenses from salary income.
Presently, a tax payer can get a deduction in some form or the other under most heads of income besides salary.
For example, under the head income from house property, you are entitled to claim a deduction of 30% from the net annual value of the house to cover all your expenses.
This issue is being addressed by the revival of the standard deduction, which is a fixed amount that tax authorities will allow as a deduction from gross income that can be used to tackle unavoidable expenses. Experts are prediction that this amount could be as high as Rs 100,000 per annum.
- Relief for individuals that have taken a loan to purchase a house property and received possession after 3 years
The expected relief may come in the form of an increase in the time limit from 3 years to 5 years for claiming a deduction for mortgage interest on self-occupied house property.
Presently, you can get a deduction of up to Rs. 2,00,000 if you acquire/construct a self-occupied house within 3 years from the end of the financial year in which you took the home loan. If these conditions are not satisfied, you get a maximum deduction of Rs. 30,000.
This move will thus come as a huge relief to individuals who have not yet received possession of their houses.
- Prices of tobacco and alcohol products likely to increase
The Indian Health ministry along with the World Health Organisation (WHO) and other public health groups have proposed a hike in taxes of up to 40% for all tobacco products.
Union health minister JP Nadda has formally asked the Finance ministry to explore the possibility of levying a new 'sin tax' or 'health cess' on 'demerit goods' such as tobacco and alcohol/ Nadda has suggested that the proceeds received from this move be used by the government exclusively for investment in public health measures.
A “sin tax” is an excise tax that is levied on products and services considered to be detrimental for health, such as alcohol, tobacco and gambling.
The major argument is that the costs of such products is not increasing at the same rate as income, which may actually be making such goods more affordable to the common public.
- Government may consider reducing import duty on tea and coffee
In light of industry demands, the government is said to be considering a reduction of the import duty on machinery in the tea and coffee industry. The objective of this move is to increase domestic production and the quantity of exports.
Currently, the duty on coffee processing machines is about 30 per cent, and on tea machines it is about 10 per cent.
- Tax benefits for leather, gems & jewellery likely
Similarly, to provide a boost to domestic manufacturing and international exports, the government is also considering doling out tax benefits for labour intensive industries such as leather, gems and jewellery.
The leather and leather good sector specifically is under the Make in India program initiative of the central government, who aims to increase its exports to $20 billion in 2020 from its present $6 billion.
As one of its many budget suggestions to the finance ministry, the Commerce and Industry Ministry have suggested that the customs duty on imported leather machinery- which currently stands at about 26.5%, be eliminated entirely.
For gems and jewellery, another focal point under the 'Make in India' programme, the industry has asked to raise customs duty to 15 per cent from the current 10 per cent and abolish the excise duty from the current rate of 6 per cent on imitation jewellery.
For more information on how the budget, read: