Memo to FM Sitharaman: Put more money in people’s hands

Indian households, which saw their incomes drop during the Covid-19 pandemic, have a loud and clear message for Finance Minister Nirmala Sitharaman ahead of Budget 2022: Put more money in the hands of the taxpayer to power the fledgling economic recovery.

Salaried employees told DH they want the government to provide more tax relief and put an end to the practice of taxing the interest income from savings instruments such as recurring deposits and fixed deposits.

They also hoped to see an increase in the standard deduction limit, currently at Rs 50,000 per annum.

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They also urged the government to increase the Employee Provident Fund Organization pension rates so that senior citizens could cope better with higher living costs.

Retired citizens clamoured for better interest rates on fixed deposits while those who invest in the markets wanted the government to consider a rollback of the long-term capital gains tax on equity mutual funds.

Most respondents in a pre-Budget survey conducted by KPMG said they expect an enhancement in the basic income tax exemption limit of Rs 2.5 Lakh.

Respondents also supported an upward revision in the top income slab of Rs 10 lakh and above, and an increase in the existing section 80C deduction limit of Rs 1.5 lakh.

Delhi-based software engineer Anshul Gupta, 30, said he wanted to see more than a mere tweak in the tax slabs this year.

“It’s not just tax slabs that will help the middle class. Various tax slabs for income tax is just one part of the problem. I wish the government stopped taxing interest on recurring deposits (RD) and fixed deposits (FD) and ensured decent interest rates too because a major part of the population are like me - who do not understand and do not want to take the risk of investing in the stock market,” Gupta said.

Gupta is among the majority of Indians who have no exposure to the capital markets. Despite being home to a population of 138 crore, India has only 1.2 crore active investors.

Indians are trying to find a way to save more after seeing their household incomes fall during the Covid-19 pandemic-induced lockdowns and borrowing heavily to cope with inflationary pressures in recent times.

Reserve Bank of India data in September 2021 showed an increase in bank deposits, with private-sector banks recording a 16% rise and public sector banks posting a 7.4% rise.

“Apart from taxing the salaried class, interest rate too has been heavily reduced and impacting income of pensioners, and except retired government employees, not many get pension and even those who do get, it is a pittance. Government should enhance interest rates on FD,” said Sri Krishna, a retired journalist from Delhi.

Some others such as Vidyadharan Mangalath, a communications professional, wanted the government to increase the EPFO pension rates.

“Most senior citizens in our country who used to work in the private sector do not get a reasonable pension. EPFO pays a maximum of Rs 3000 per month. This pension needs to be enhanced to a reasonable level”, said Mangalath.

Those catering to retail investors had different expectations.

“A lot of clients we work with wish the government would scrap LTCG. We agree also because through this, the government would incentivise investing for the long term and not just trading,” said Kshitiz Mahajan, the co-founder of wealth management firm Complete Circle Capital Private Limited.

Retail clients wanted an upward revision of the standard deduction too.

“Middle-class investors want more in their hands so that they can spend more on investments,” said B Gopkumar from Axis Securities.

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