10 Ideas for Budget 2018 To Make Common Man’s Personal Finance Less Taxing

Jun 05, 2018 | 1 year ago | Read Time: 3 minutes | By iKnowledge Team

The Union Budget 2018 is around the corner. Finance minister Arun Jaitley and his team at the North Block are putting the final touches to the most closely-watched economic activity of the calendar. There is a growing expectation that the February 1 event will have enough for the common man as it is the last full budget before the general elections next year.

As a tax-obsessed society, we would like to see the FM announce measures that will reduce our tax burden. At the same time, we would like to continue with the fast-paced economic growth of our country.

Here is a look at 10 ideas that may make the Budget 2018 interesting.

  1. Reduction in GST rate to 5% for insurance products: Insurance products have become costly after the Goods and Services Tax (GST) rate was raised for financial products. The rate was increased to 18% from the initial 15%. Since the higher GST slab did no good to anyone, the government could reconsider its decision, which will help popularise insurance products. This is critical because India continues to remain grossly under-insured. In fact, insurance penetration in the country is 3.42, which is way below the global average of 6.2%.
  2. Do away with taxability of pension plans: Annuity plans are still not popular in our country. As these plans are taxable, many senior citizens have opted out of them. If an investor does not buy an annuity on maturity, 66% of the corpus is taxed at present. Even the pension from the annuity is treated as income and is taxed. The Budget 2018 can address this issue by doing away with taxing such plans.
  3. Tax relief for senior citizens: Senior citizens are finding it increasingly difficult to have a steady income. Bank fixed deposits are no more their favoured option as interest rates have declined steadily. The government can comfort them by offering tax relief.
  4. Hike tax-free limit of medical allowance: Medical expenses are ballooning every year. If the government revises the tax-free limit of Rs 15,000 a year, employers will look to hike the allowance for their employees. This will benefit those working in the organised sector to save more tax.
  5. Make a case for home insurance: The government should try to make home insurance compulsory to reduce the burden on the common man in the event of a natural calamity like floods or earthquake. The premium paid towards such policies should also be made tax-free.
  6. Reduce customs duty on gold: Gold has been assigned a special GST slab of 3%, but import draws a high customs duty of 10%. The anomaly is encouraging smuggling. If customs duty is aligned to the GST rate, it will be better for everybody.
  7. Repeal STT: As the markets are scaling new highs every other day, there is a strong case for doing away with Securities Transaction Tax (STT) and the withdrawal of the tax-free status of long-term capital gains. These steps will encourage people to buy equities. They can then make the most of the stock market boom.
  8. Get rid of DDT: The dividend distribution tax (DDT) discourages companies from paying dividends. Sometimes the dividend is all a shareholder gets as the return on his or her investment in a year. With the DDT in place, the investor stands to lose. The DDT should be removed immediately to improve investor sentiment.
  9. Increase tax slabs: The government should consider reducing the individual tax rates or increasing slab limits. It has been a while that the finance minister has altered the tax slabs and raised the limits to reduce the burden on the common man. Budget 2018 can bring back a standard deduction for the salaried class.
  10. Get rid of multiple KYC: There has been no let up in updating know-your-customer (KYC) norms. Multiple KYC only add to the daily woes of the public.

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