Budget 2023 in focus

Nothing is fine with common households
"Current limit of Rs. 1.5 lakh has not been revised for the last nine years and demand for hike in this segment merits consideration that will allow higher tax savings."
"Current limit of Rs. 1.5 lakh has not been revised for the last nine years and demand for hike in this segment merits consideration that will allow higher tax savings."Special arrangement

Work on Union Budget 2023 started soon after the finance ministry concluded  consultations with various industry bodies and financial experts. The situation is not rosy for the government to extend some major relief to the consumers and the taxpayers.

More tax deductions and lower tax rates have always dominated the wishlist, but it has always been difficult for the government to give out tax sops on the desired lines.

However, there are certain areas where there is scope to give some relaxations to the taxpayers. Experts have been rightly picking the tax deduction under Section 80D for consideration of some more relief. It was last revised in 2014.

Current limit of Rs. 1.5 lakh has not been revised for the last nine years and demand for hike in this segment merits consideration that will allow higher tax savings.

Similarly, there is a demand to give more sops for home buyers as the prices of houses are increasing. The rising interest rates on home loans is further adding to the burden of home buyers and makes it difficult for the people to buy a house.

There is a scope to increase the current tax rebate of Rs. 2 lakh on home loan interest repayment to Rs. 4 to Rs. 5 lakh.  Enhancing the exemption can help to reduce the cost of purchase for home buyers.

Covid-19 has given a boost to health insurance. Those having a health insurance cover are eligible to get a deduction limit of Rs.25,000 under Section 80D.

This tax relief  is too small when compared to the cost of insurance premium which, as per a LocalCircles survey between August 2021 and August 2022, among 10,000 respondents, nearly 38% saw a premium rise of over 50% in a year, while 24% experienced a 25-50% increase.

For senior citizens, this amount almost doubled in a year. The cost of hospitalization and other treatment expenses have gone up considerably. In pre-pandemic period, if an insurance cover for health expenses used to be around Rs. 5-10 lakhs, the same ever in post-pandemic needs not less than Rs.15-20 lakh cover. It is here the experts wish to increase the limit to claim tax deduction so that health insurance becomes affordable and encourage people to go for it.

It would be interesting to see how the budget takes on rising prices of essential commodities and other products. The uncontrolled rising prices have been giving sleepless nights to consumers as it is contrary to the given situation where wage deflation and increasing joblessness have pushed (and continue to push) households into distress.

The skyrocketing prices of even some basic vegetables like Potato and Onion, essentially known as staple food items of the economically poor section, have miserably hit the kitchen budget of households. For a common consumer, managing potatoes in their meals has become a big deal for poor and even lower middle class households.

A comparative analysis of data by the consumer affairs ministry shows that in average wholesale prices, potato prices have gone up by over 100% and onions witnessed an increase of almost 50% in the past one year. The kind of uncontrolled price rise witnessed in essential items and kitchen staples is emerging as a major worry for household budgets.

Precisely, food items like onions and potatoes are fast getting out of reach for poor and even lower middle class. So the situation suggests all is not going to be well with kitchen budgets in the coming times.

Even as the government has appreciably taken several steps to give relief to the poor like free distribution of grains to ration card holders, in the continued price inflationary pressure along with wage deflation and increased joblessness, such measures fall short of solving the worries of common households. Notably, the price rise in essential commodities is always severely damaging in nature as lower strata take hits on their spine.

In the given situation and amid a host of expectations by the Indian Inc and other stakeholders, it would be a never-seen-before challenge for the union finance minister, Nirmala Sitharaman, to accommodate most of the listed demands. To be precise, spine-breaking pricing of commodities – both essentials and non-essential – is not going to end soon. And the most important thing is that whatever goes up, never comes down.

In this situation the consumers should not look at the budget for relief. It may provide relief on one front, but will load you with more responsibilities in terms of taxes on the other front. At the moment, when the behavior of the virus is still unpredictable, it would be better for the common man to control spending.

The families are in a rush to own a car or a two wheeler or both. The scenario is such that every member pursues a dream to have his own car. For this, banks have been playing a major role as they have tailored auto loan schemes to woo even lower middle class section to avail loan for purchase of a car or a two wheeler. The depreciation of the rupee coupled with the huge burden of taxes has impacted the automobile sector. Input costs have risen and there are companies using imported components which have to bear more costs. Some companies will have to pay higher royalty to foreign parent firms and some have foreign currency loans.

Meanwhile, the pandemic has exposed scores of loopholes in our way of living, managing and shaping our future. At the same time this unprecedented crisis has placed some important financial lessons, which can help us to safely navigate any future crisis. In other words, the situation has prioritized money management skills as an arsenal to stay afloat in difficult times.

Here, the most basic and essential step during difficult times is to have a budget. Basically budgeting lies at the foundation of every financial plan. It’s about understanding how much money you have, where it goes, and then simultaneously planning how to best allocate those funds to realize different goals. Creating a budget always looks just a tedious financial exercise, that too when you feel your finances are already in proper order. But you might be surprised at just how valuable a budget can be. A budget helps you to keep your spending on track. Adopt the saving habits and you’ll be laughing all the way to the bank in no time. It is not cumbersome. Just do a simple thing. Record your daily expenses, add them up and if you find that the total exceeds the amount of your income, then it’s time to cut down on your spending. Once you have come up with a realistic budget, avoid the temptation to overdo when you are out shopping. Cutting back on your day-to-day expenses and resisting temptation makes it much easier for you to save.

Precisely, consumers have to cut down their expenses. Let them control their purchasing power which digital financial products have vested with them. There are certain purchases, which can be postponed. They can even cut down the use of cars or two wheelers to save money on fuel.

Most of the online shopping is not based on necessity. There are online commerce sites which sell products in dollars. They need to shelve their craze of online shopping, neutralize the buying of non-essential items for the moment and save for a rainy day.

Meanwhile, the government needs to ensure that potatoes and onions don’t slip out of the hands of the poor and lower middle class section as rich man’s food only.

(The views are of the author & not the institution he works for)

DISCLAIMER: The views and opinions expressed in this article are the personal opinions of the author.

The facts, analysis, assumptions and perspective appearing in the article do not reflect the views of GK.

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