Income Tax Sops Necessary As Income Growth Likely To Be Muted

Increase in income tax slabs is due for several years. It is something that salaried individuals have been looking forward to during every budget.
The possibility of growth in salaried individuals' income is limited in the next financial year. At the same time, inflation continues to be on the higher side while the new tax slabs, with conditions, introduced last year did not find favours with many taxpayers.
Increased tax slabs can improve consumption as there will be more disposable income at salaried individuals' end. Over the last few years, even the standard of living has been continuously improving, so has been the cost of living in most cities.
A higher deduction under section 80C to avail tax rebate would be useful on the tax rebate front as it will encourage more savings and long-term investment. Providing additional tax benefits for new home buyers during the next financial year in the form of a higher tax rebate on interest repayment will encourage a segment of the population to buy homes. The additional tax saving benefit can act as an incentive and increase demand in the real estate sector.
The government should consider increasing the additional deduction limit for individuals from Rs.50,000 to Rs.100,000 or Rs.150,000 when it comes to New Pension Schemes (NPS). At present, the section 80C limit of Rs 150,000 for many taxpayers is not enough to save tax. Increasing the NPS limit for additional deduction will help people save taxes and encourage long-term investing. At present, NPS account holders can withdraw 60% at vesting age which is taxfree, and the remaining 40% is to be invested compulsorily in annuities.
Medical expenses are surging every year in India, and higher health insurance covers are crucial. A higher exemption limit under Sec 80D for health insurance premiums will bring tax relief and encourage people to opt for adequate health insurance.
Additional allocation to improve the healthcare and education sector's infrastructure is important on the government's spending front. The need for a more organized healthcare and education sector is evident from our experience during the Covid-19 crisis. Undoubtedly, the authorities have done a commendable job to ensure people's safety during those tough times. Still, this event also highlights the need for well-organized healthcare and a better-equipped education sector.

The author is Co-Founder of MyWealthGrowth.com