My Budget 2016 | Government should rationalise HRA exemption & widen tax base, says this investment banker

Every year, financial gurus speculate what the Union Budget will bring. Some even offer suggestions on what the Budget should include. Be it the man on the street or a corporate head honcho, everyone has their own demands and expectations. It is always tough for the government to keep both the segments satisfied.

While housing and taxation seem to be the biggest issues concerning the common man, taxpayers are usually divided over what kind of budget they want. Most look for a balanced budget that broadens the tax net without raising taxes while others seek a growth budget.

Here are my expectations from this year's budget, and a few predictions while I'm at it.

Expectations

• Rationalise HRA exemption: Metropolitan cities attract a lot of qualified individuals from across India who stay in rented accommodations and lose out on the tax benefit in spite of paying high rents.

• Widen the tax base: The narrow base of taxpayers results in a higher rate of income tax on the compliant taxpayers who develop a sense of unfairness. Some measures could be in the form of more awareness campaigns, providing some form of social recognition to the taxpayers, and maybe even routing some social benefits through the tax filing mechanism like what the US has done.

• National Pension Scheme: The NPS is structured as an Exempt Exempt Tax (EET) scheme. The scheme should be made exempt.

The 2015-2016 budget was well balanced since it gave impetus to long-term growth and laid a credible road map of fiscal consolidation. The budget has increased allocation towards infrastructure spending - in a bid to kick-start capital expenditure and has subsequently revised fiscal deficit targets that could be achieved over the next three years.

We continue to believe that equities, albeit reasonably valued, offer a good medium to long-term investment opportunity. Investors are recommended to invest in equities with a three to five-year view.

On fixed income, I believe there is scope for interest rates to come down and that it remains an appropriate investment opportunity in the short to medium-term period.

Predictions

• The government may not raise the time frame of long-term Capital Gains Tax.

• It is unlikely that the government will raise the time frame of long-term capital gains tax to three years from the current one year, given the market scenario.

• No rate hike until at least 2018.

-- Apurva Vardhman, age 30 (Investment Banker)