The budget affects the aam aadmi or common man in various respects. It has the ability to affect our investment and consumption patterns to a significant level. This is why all eyes are set on the first full budget of the Modi-led-NDA Government, which is to be announced on February 28, 2015.
 

Let us look at the 8 things that are on the wish-list of the common man:
 

1. Raise in the income tax exemption limit
   
   So as to increase their purchasing power and enjoy a higher disposable income, the common man desires that the income tax exemption limit be raised from the existing Rs 2,50,000 to Rs 3,00,000. Such expectation has ensued after the Modi-led-NDA Government increased the base exemption by Rs 50,000 in its first budget presented in July 2014. If the Government honours this expectation, it would lead to higher demand and investments in the economy.
    
2. Reinstate the deduction for investments in infrastructure bonds
   
   The Finance Act, 2010, had introduced Section 80CCF to encourage inflows into the infrastructure sector. This section was extended further vide the Finance Act, 2011 for financial year 2011-12. But later, there was no clause for extension in the Finance Act, 2012 and therefore from the financial year 2012-13 this deduction was not available. A deduction of up to Rs 20,000 was available under this section to individuals and HUFs which provided a further tax relief to assessees, especially those with a high taxable income. Now that the Modi-led-NDA Government has the agenda of promoting infrastructure to clock better economic growth, it is expected that the Government may once again reinstate this Section in budget 2015-16, and this time possibly with a higher deduction limit of upto Rs 50,000.
    
3. Reduce the lock-in period on tax saving fixed deposits
   
   The electorate are also expecting that the finance minister will reduce the lock-in period of tax saving FDs to 3 years from 5 years at present; a move which makes them analogous as regards the lock-in tenure is concerned. Such an expectation if honoured would result in higher savings through bank FDs and also give a boost to the banking sector.
    
4. Raise in the limit for reimbursement of medical expenses
   
   The present medical reimbursement limit of Rs 15,000 for salaried employees was fixed more than 15 years ago (to be precise in 1998). But as medical costs have gone up manifold over the last few years, there is an expectation that this limit be raised to Rs 50,000 in the budget 2015-16, much in line with the proposed DTC.
    
5. Raise in the exemption limit for education allowance and hostel allowance
   
   If you are a salaried employee, then the exemption limit for your child’s education stands at Rs 100 per month per child for a maximum of two children, while the allowance for his / her hostel expenses stands at Rs 300 per month per child for a maximum of two children, at present. These limits were set several years ago and in order to meet the rising education costs, it is expected of the finance minister to re-evaluate and increase these exemption limits.
    
6. Raise in the exemption limit for conveyance allowance
   
   At present, the exemption limit for conveyance allowance is Rs 800 per month applicable to salaried individuals. This limit was introduced for first time in 1998. But over the year as the cost of commuting has gone up, this limit appears inadequate and thus needs reconsideration. The aam aadmi expects this limit to be raised to at least Rs 3,000 per month in the forthcoming budget.
    
7. Hike in the deduction limit under Section 80C
   
   The deduction available under section 80C (which includes investments made in PPF, NSC, 5-year FDs, life insurance premiums, EPF and so on) was raised from Rs 1,00,000 to Rs 1,50,000 in 2014. However, in order to have a higher disposable income and be able to save and invest a higher amount, consumers and investors are expecting this limit to be raised by another Rs 50,000 in the forthcoming budget, taking the deduction limit under Section 80C to Rs 2,00,000.
    
8. Include Mutual Fund Linked Retirement Plan (MFLRP) under section 80CCD
   
   Recently, the Securities and Exchange Board of India (SEBI) has proposed to include MFLRPs under section 80CCD (which includes National Pension Scheme). It is expected of the finance minister to implement this in the forthcoming budget, in the interest of investors which in turn can also benefit the Indian mutual fund industry as they would manage long term hard earned money.
    

PersonalFN is of the view that while there are host of expectations from electorates who voted the Modi-led-NDA Government to power by a thumping majority, the walk to the path of fiscal consolidation also needs to be watched carefully. The Modi-led-NDA Government has decided to achieve the fiscal deficit target (set by the predecessor) of 4.1% of GDP for the fiscal year 2014-15 and reduce it further to 3.6% in fiscal year 2015-16, followed by 3.0% in 2016-17. So, in this backdrop what the budget 2015-16 offers the aam aadmi needs to be carefully seen, while the Modi-led-NDA Government has heightened expectations of acche din.

It is not certain whether these expectations will be honoured in the budget or not. Nevertheless, investors would be better-off if they engage in effective tax planning within the purview of tax benefits extended to them in order to save tax optimally. Also, it is vital that the tax planning exercise is not left for the eleventh hour. By planning for your taxes prudently, you will not only be able to save taxes but also be able to meet your financial goals.

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