Budget wish-list: Individual taxpayers have three big asks – The Financial Express
Rationalisation of capital gains tax, hike in tax exemption on health insurance premium and deduction on housing loan are among the priorities for individual taxpayers
The Union Budget 2022–23 will have to do a balancing act of supporting economic recovery and maintaining fiscal prudence. With rise in direct tax collections, taxpayers hope for increases in basic exemption limit and standard deduction. Individuals expect a hike in exemption limit for health insurance and higher tax incentives for investing in the National Pension Scheme. Taxpayers would also expect rationalisation of taxes for capital gains and tax-free annuity income.
Rationalisation of taxes for capital gains
At present, bonds held for 12 months are subject to long-term capital gains (LTCG) tax while debt mutual funds need to be held for 36 months for LTCG tax.
Uniformity in LTCG holding period for listed debt securities and debt mutual funds will help plan investments efficiently and also plug revenue leakage for the government. The Budget should also bring in parity in taxation of capital gains from investments in mutual funds and unit-linked insurance plans (Ulips). Capital gains on Ulips are completely tax free on aggregate annual premium up to Rs 2.5 lakh a year.
Kaustubh Belapurkar, director, manager, Research, Morningstar India, says only funds that invest at least 65% into equities are granted equity taxation. “Fund of funds that invest into underlying equity funds, meeting a similar criteria should also be granted a similar status,” he says.
Hike in exemption for health insurance
The pandemic has raised awareness around the need for health insurance which can help mitigate the financial burden of treatments, hospitalisation, and even post-Covid medical expenses.
However, health insurance penetration in India is abysmally low and needs to be more affordable for the people and lucrative for taxpayers.
Currently, tax payers (below 60 years) get exemption under Section 80D for health insurance premium of Rs 25,000 for self, spouse and children. If the parents are senior citizens, there is an additional deduction of Rs 50,000.
To encourage more people to purchase health insurance and to ensure that they purchase the appropriate quantity of coverage, Pankaj Arora MD & CEO, Raheja QBE General Insurance, says Section 80D income tax exemptions should be raised, ideally doubled, in light of higher medical expenses post-Covid. “Again, eliminating GST on health insurance premiums can make it more affordable and increase penetration, especially in rural India.”
Similarly, P C Kandpal, MD & CEO, SBI General Insurance, says increasing the tax exemption under Section 80C especially on health insurance premium can help boost health insurance penetration.
Increase in interest deduction on housing loan
As the real estate sector is one of the largest employers, it expects the Budget to enhance the limit for interest deduction on housing loans, extend the Pradhan Mantri Awas Yojana subsidy which is due to end in March and removal of GST for a certain period on purchase of units by economically weaker sections and low-income group customers.
Under Section 24, taxpayers get a deduction of up to Rs 2 lakh for interest paid on housing loan for self occupied house and no limit for non-self occupied house.
Moreover, last year the government extended the additional tax deduction of Rs 1.5 lakh on housing loans for purchase of affordable homes by one more year. Experts suggest an increase in tax deduction on interest paid for housing loans will boost sentiments and help individuals.
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