For Shalini Nandwani, a housewife, the Budget means little. While finance ministers talk about bringing down inflation, it seems to go up every year. For instance, one litre of cooking oil was costing her Rs 83 last year. This year, it's up at Rs 95. "Where is the so-called negative inflation?" wondered Nandwani. The tax benefits that were given by Finance Minister P Chidambaram in the last year's Budget were welcomed. But for Nandwani, things would be better if some more steps are taken.
Make food items cheaper
While inflation (based on the wholesale price index or WPI) is falling, the consumer price index (CPI) continues to rise. For instance, while the WPI was at -1.14 per cent (week ended June 13), the consumer price index was at 8.70 per cent (in April). Clearly, the numbers do not look rosy.
Hike exemption on home loan
At present, under Section 80C, a home-buyer gets the benefit of tax exemption of Rs 1 lakh on principal repayment. Also, there is a tax exemption of up to Rs 1.5 lakh on interest payout. Given that the cost of buying a house is over Rs 20 lakh in most areas, any hike in the limit will be welcome move. "The limit should be hiked, but only for affordable housing. And the limit should be different for different cities," said Mukesh Dedhia, director, Ghalla & Bhanshali.
Remove surcharge on direct taxes
Tax consultant Kanu Doshi feels it is time that the education cess of 3 per cent is scrapped. "Any cess, by definition, is for a short period. However, we have seen it going on for years now," said Doshi.
Increase the limit of Section 80 DDB
This section provides relief up to Rs 60,000 for medical expenses incurred on the treatment of a dependent person. Financial experts feel that this limit is inadequate in the face of rising medical costs.
Financial planners suggest some more long-term measures.
Change the structure of Section 80C
While the number of instruments under Section 80C has increased, the limit has stayed the same. "The government could look at differentiating between investment and expenses under this section," said Gaurav Mashruwala, a certified financial planner. For instance, expenses on children's school and college fees and investments in ELSS, PPF and EPF are all clubbed together for tax exemption under Section 80C.
Draft tax dividends
At present, when companies pay dividend, first they have to pay a tax of 33.99 per cent on their income (30 per cent + 10 per cent surcharge + 3 per cent education cess). When they pay dividend distribution tax (DDT), it is another 14 per cent. Effectively, the investor gets dividend after 40 per cent of the amount has been taxed already.
This can seriously hurt small investors, especially senior citizens who are dependent on additional income from these sources. In some foreign countries, if the company pays dividend after DDT and income tax, the investor can get a refund according to his income slab. Popularly known as "dividend franking", this is a good method to compensate stock market investors in lower income brackets.
