Union Budget 2011: Expectations and Implications for the Middle Class

Strategic Insights -

The Union Budget 2011 is set to be tabled by finance minister Pranab Mukherjee on Monday, with the middle class eagerly awaiting proposals to raise the first slab of income tax and maintain existing prices of domestic LPG. As the fiscal deficit is already on the higher side, experts feel that Mukherjee may refrain from implementing populist ideas. The middle class is expecting relief through direct and indirect tax concessions, including a rise in the exemption limit for various allowances and the removal of service tax on housing.

Key Takeaways:

  • The middle class is hoping for the income tax's first slab to be raised from Rs1.60 lakh to Rs2 lakh, which will help the common man and increase the permissible deduction under Section 80C & 80 CCF from Rs1.20 lakh to Rs1.50 lakh.
  • Reforms in taxable income, direct and indirect tax fronts are expected from the budget to keep the common man happy.
  • The common man is also expecting a deduction on interest on housing loans from Rs1.50 lakh to Rs1.80 lakh and concessions in direct taxes such as increasing the exemption limit for various allowances for the salaried class.
  • Indirect taxes such as VAT, excise, customs, and service tax are expected to be rationalized, with control over petroleum prices and the removal of service tax on housing.
  • Expectations include a rise in exemption limit for various allowances, removal of service tax on housing, and speeding up the implementation of goods and services tax.

Statistics:

  • The fiscal deficit is already on the higher side, providing limited scope for big experiments.
  • The income tax's first slab is expected to be raised from Rs1.60 lakh to Rs2 lakh.
  • The permissible deduction under Section 80C & 80 CCF is expected to be raised from Rs1.20 lakh to Rs1.50 lakh.
  • The exemption limit for various allowances for the salaried class is expected to be increased.
  • The deduction on interest on housing loans is expected to be raised from Rs1.50 lakh to Rs1.80 lakh.

Sources:

  • Finance minister Pranab Mukherjee's expected budget proposals
  • Janak Shah, director of a wealth management and brokerage firm
  • Bharat Phatak, director of another wealth management firm
  • Chartered accountant Rahul Mirasdar
  • Diligent Media Corporation Ltd.