Budget 2019-20: Is there something for the Salaried Class

The New Government is in place and every citizen is once again looking forward to the Full year Budget 2019-20 to be presented by the new Finance Minister, Nirmala Sitharaman on 5^th July 2019. This will be the first full Budget of Modi Govt -2. There was a budget presented by then Finance Minister, Piyush Goyal in Feb 2019 but that was an interim budget.

You can read more about the Indian Budget on the following link:

https://www.indiabudget.gov.in/

The Interim Budget 2019-20

Under the Interim Budget 2019-20, the FM had proposed a whole lot of benefits for the salaried-class people and middle-income group people. Few of the highlights of Budget 2019-20 presented by Piyush Goyal were:

Highlights:

1.Tax rebate goes upto Rs 5,00,000. The benefit will be available only to those with a total taxable income of less than or up to Rs 5 lakhs after availing all the deductions.

2.No change in tax structure for those in higher income brackets.

I will just stick to the above two points. If you study closely it doesn’t impact me or any of my friends as we all fall in Income levels of Rs 5 lakh plus annually. It means we will keep paying tax where the highest slab is of 30% tax on an income of Rs 10 lakh and more.

Why Salaried Indians need a big hike in the standard deduction

A recent article in the TOI dated 29^th June 2019 suggested that Indians need a big hike in Standard Deduction. It says that the income-tax rules seem skewed against salaried employees. While businessmen and consultants can claim exemptions against all kinds of expenses every month, for salaried employees, tax is deducted at source by the employer, which significantly lowers the take-home pay.

The solution suggested in the story is that Govt should increase the standard deduction not by a token amount, but substantially. The standard deduction is the amount that gets subtracted from your taxable income.

A Comparison:

The article makes a comparison of a Salaried person with a gross income of Rs 30 lakh per anum with a Consultant in the same bracket. Consultants can avail 50% of their gross receipts as expenses (provided their income is less than Rs 50 lakh). It means that the consultant ends up paying tax only on Rs 15 lakh while the balance Rs 15 lakh can be claimed as expenses. The salaried class person ends up paying an Income tax of Rs 6.73 lakhs while the Consultant pays a paltry Rs 2.18 lakh.  This anomaly should be rectified immediately in Budget 2019-20

Monthly Expense Statement of an Average Middle-Class Family

Let’s study the monthly expense pattern of any middle-class Indian family of 4 people – Husband, Wife and 2 kids: 

Monthly Expenses of an average Middle-Class Indian Household
S.No.	Expense Head	Amount (Rs)
1	Rent	25000
2	Electricity	5000
3	Petrol	8000
4	Grocery	8000
5	Milk	2500
6	Vegetables	2500
7	School Fees	15000
8	Medical	4000
9	Servant salary	4000
10	RWA Fees	1000
11	Tel expenses	2500
12	Entertainment	2500
13	Misc. expenses	10000
14	Savings in Bank	10000
	Total	100000

This is how an average middle-class survives in Metro cities. As families move up the ladder,the expenses get multiplied by a factor of 2 or 3 depending on their incomes. So, somebody earning Rs 24 lakh per anum can afford Rs 50000 rent per month and somebody earning Rs 36 lakh can afford Rs 75000 rent per month.

The Economic Survey

The Economic survey which gets released a day before the budget should take this simple expense chart of a family into consideration and recommend it to the Finance Ministry. The Finance Ministry should take this into account for the Budget 2019-20.

Change the Income Tax slabs in Budget 2019-20

The above expense statement proves that an average family ends up spending 90% of the income on basic survival. Savings per month is just 10%. The Income-tax should exempt expenses of Rs 10 lakh per anum from any tax.

Suggested tax slabs

1.Up to Rs 10 lakh – Nil

2.10-20 lakh – 10%

3.20-30 lakh – 20%

4.30 lakh and above – 30%

I am no Economist so don’t know how much will these impact the overall tax collections but I am sure that the government should start expanding the tax base.

Why Middle-Class is asking for exemptions in Budget 2019-20?

1.The Salaried and the middle-class want a good education for their children. With a less burden of tax, they can afford to give better education to their kids.

2.The government doesn’t provide any kind of health security cover to the middle-class. They have to buy their own Mediclaim policy to cover health risks. Government hospitals are overcrowded while private ones are expensive.

Without a Mediclaim policy, it’s impossible to even think of getting admitted to a private hospital. Today a double room in a private ward of a decent Hospital comes for Rs 8000 per night. A single room in Corporate Hospitals like Apollo or Medanta would be Rs 15000 plus. Consultation fees of MD doctors are Rs 800.

3.The private sector has no pension cover and needs to save for their post-retirement. This is a compulsory saving and should not be equated with savings for recreational purposes.

4.A taxpayer, till the time he is in a job, pays his income tax. But the day he loses his job, he doesn’t get any social security cover. He has to feed himself. This is unfair to him.

We pay taxes on all Goods and Services

5.The tax collected by the government goes in the welfare of the society – upliftment of the poor, creation of infrastructure, health and education for the poor and so on. But I still remember the famous words of our late PM Shri Rajiv Gandhi that out of every Rupee government spends on the welfare of the poor, only 15 paise reaches to him. This may have improved in the post Aadhar scenario but I have a feeling that there is a lot of leakages still.

6.Govt says that they spend tax collected from us on the creation of Infrastructure. But these days we end up paying a toll fee on all highways.

7.Use any services and you end up paying 18% GST. Whether it is your mobile bill or buying a car or household items, we pay taxes on everything.

8.We pay some of the highest taxes on Petrol and Diesel. Our airlines have been complaining that the Aviation turbine fuel in India is the most expensive in the world. If the taxes can be lowered and matched with international levels, maybe the flight ticket prices will come down.

9.You buy Liquor in any state, the prices will vary. States like UP and Tamil Nadu charge exorbitant tax rates on Liquor. My question is why can’t we have uniform pricing across India? Why is Liquor pricing as well as distribution still a state subject and not in hand of the Central government?

To Conclude

The government has to realise that the tax collected from the citizens is precious money and has to be spent wisely. And if it can’t be spent wisely then it has no right to tax its ordinary citizens on every point from Salary to Petrol to Liquor to Mobile bills. My request to FM is that please incorporate few of the suggestions to make the lives of a salaried class a bit easier.

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