Union Budget 2016: What are the expectations

Budget 2016 comes at a time when India needs to increase investments in its social and physical infrastructure and when the central government’s own finances will be constrained due to fiscal deficit targets and 7th Pay Commission recommendations. To take off some load from government’s own finances, this budget should introduce some changes in tax exemptions and deductions to increase domestic savings rate channel those savings into long-term investment and insurance products. Long-term investment and insurance products will not only boost the financial well-being of individuals, it will also help the government and private sector to raise funds for their capital expenditure and cope with FII outflows from capital markets.

Introduce tax deductions for house insurance premiums: Not having home insurance leaves us vulnerable to huge financial damages from natural calamities, such as earthquakes, landslides and floods. Introducing tax exemptions for home insurance premiums would encourage people to insure their homes and secure their financial well-being from the acts of nature.

Bring pension products from insurance and mutual funds under Section 80CCD (1B): Currently, you can avail an additional deduction of Rs 50,000 under Section 80CCD (1B) over and above the Rs. 1.5 lakh limit available under Section 80C. However, this deduction is only available for investments in NPS. As the main objective of this section is to increase pension coverage in India and provide some sort of social security to senior citizens, bringing pension plans from mutual funds and insurance companies under this section will increase the competition in pension space and thereby, bring more people under pension coverage.

To sum it up, Budget 2016 should use tax-exemption limits to encourage people to increase their exposure in long-term investment products and buy essential insurance covers. This will also help the government to realise its objective of comprehensive financial inclusion and help raise funds for financing capital expenditure in the infrastructure sector.

Source: DC