10-June-2016 written by : FSI-Team
The common man looks to every new budget with hope – hope for tax relief, hope for inflation to be controlled or lowered, hope for investments to yield greater returns, hope for prices of common commodities to remain stable. Did the Union budget of 2016 deliver them? Well, it was a mix of both, considering who you consider the common man.
Is the common man of an urban metro city the same as the common man from an agricultural background? In trying to define both, it must be said that, whether rural or urban, anyone who works for a daily wage or monthly salary and depends on it for daily/monthly expenses and/or savings can safely be declared to be in the “common man” category. If you add the factor of the income bracket, the face of the common man begins to emerge. A distinguished research firm rolls out some startling statistics about the apparent “middle-class” or common man. According to global standards, about 95% of India’s citizens falls under the low-income category, while 2% actually belong to the middle-income category. When representatives of these categories were asked which class they thought they belonged to, the unanimous answer was “middle-class”. Clearly, the middle-class of India is more than a paradigm of income. In one encompassing concept, it is the class that earns sufficiently (or less) to make ends meet, save a percentage for the future and to some degree keep pace with the consumerism that has woven itself into our lives. What are the hopes and expectations of such a class or common man and how has the budget answered them? We’ll take a look at the top 5 areas that affect the common man in urban and semi-urban areas.
Income tax slabs: Various segments of the common man expected measurable changes to the income tax slabs, hoping that exemption bracket would increase. The budget of 2016 saw a slight relief, not enough to appease those who have more than Rs. 5 lakhs as their annual salary. The tax rebate has gone up from Rs. 2000 to Rs. 5000 for those who earn lower than Rs. 5 lakh p.a.
Also, for those who do not receive house rent allowance (HRA) from their companies and who don’t have own a house, the deduction offered has gone up from Rs. 24,000 to Rs. 60,000, depending on the specific tax slab.
The biggest expectation of the honest tax-paying community, which is a woeful 3% of the population, is to cast the income tax net wider and haul in the black-money stashers. This has always proved to be far more complicated to implement despite governments’ promises and policies. The new Income Tax Disclosure scheme, whereby non-tax- payers can join the ranks of tax payers and declare their income and assets by paying a tax of 45% is yet to show its worth, since the window opens only on June 1, 2016. However, if this scheme shows some positive results, the future may look bright, as the tax burden will be more evenly distributed.
Altogether, there isn’t much to celebrate in terms of tax relief, just as yet!
Home loans: The dip and control of inflation to about 5% has had a conducive effect on consumers. The distressed real estate market has seen a revival. Home loan interest rates are more favorable. Now, with the budget of 2016 announcing a deduction of an additional Rs 50,000 on the interest slice of the repayment pie, salaried individuals can claim up to Rs. 2.5 lakhs deduction from the previous Rs. 2 lakhs. Of course, this applies to first time home buyers whose property worth is upto Rs. 50 lakhs.
Unfortunately, the stand on low income home loans is not expected to touch those living in the metro cities and belonging to higher income brackets, but those living in Tier – I and Tier –II cities.
However, if you are a first-time home buyer, then it’s time to take advantage of this tax tidal wave by running a CIBIL score check and ensuring that you are eligible for a loan. Avoid being surprised when you apply for the loan. It is better to conduct a credit check beforehand and know how to boost your credit score, so that you stand a good chance of securing that home loan.
Retirement benefits: If there was one area that caused mass outrage to the salaried class, it was with the government’s stand on pension schemes. The Budget of 2016 declared that 60% of EPF interest on employee-contributed EPF would be taxable, unless invested in a pension annuity scheme. However, PPF continues to be non-taxable, allowing people to invest up to Rs. 1.5 lakhs in a year.
Price of commodities: The price of basic commodities remains a touchy subject for the common man, with the price of pulses, a mainstay of every Indian’s meal, showing absolutely no sign of cutting back. Other lifestyle indicators such as air travel, cars, jewelry, branded garments, too, show no remission in price
Infrastructure: The Union budget of 2016 is loaded with promises to boost the infrastructure of the country with about Rs. 2,21,246 crore being allocated to various schemes to improve roadways, tap the potential to build airports, encourage gas production from indigenous sources, and invest in nuclear power generation.