Expectation from forthcoming budget from the point of view of taxation of Individual

Feb 21, 2010

Some recommendations that could ease the income tax
burden on individuals, and improve the economic
growth rate on account of increased domestic demand are mentioned below:

Raise the bar:
 
The slab of tax free income has not moved
up in line with the real inflation.

The current basic exemption limit
of Rs 1,60,000 should be increased to Rs 3,00,000.

This will increase the purchasing power of individuals and stimulate demand.

Reduce the maximum tax rate:
 
Last year, removing the surcharge only
benefited the higher income group and there
was no respite for the lower income group.

So, this year lower and middle income group
can be benefitted by reducing the peak rate from
current 30% to 25%.

Further, the peak rate should be attracted
at significantly higher income slab (as compared
to current limit of Rs 5,00,000).

Though this aspect has been recognised in
the proposed Direct Tax Code (DTC),
the same also needs to be considered in the forthcoming budget.

Increase the investment limit under Section 80C of I-T Act: 

Though , the avenues for investment under Section 80C have
been increased with the years, the limit of Rs 100,000 has remained
the same.

The Government should increase the aggregate deductible
limit under Section 80C of I-T Act from Rs 1,00,000 to Rs 2,50,000.

This will encourage long term savings by tax payers and also
enhance availability of low cost funds for the Government to
meet its long term development needs.

Additional benefits related to housing:
 
Currently, an individual is permitted deduction
for interest on loan for a self-occupied property
up to Rs 1,50,000. This limit has not been
revised for a long time, while property prices
have increased manifold.

The Government should consider
increasing this limit to Rs 3,00,000 or
alternatively, this cap may be scrapped.

Also the deduction available under Section 80C of I-T Act
on repayment of principal amount of housing loan should
be appropriately increased. This would not only encourage
investment in the real estate sector but will also make
buying a house relatively affordable.

Medical expense reimbursements:

Medical expenses of up to Rs 15,000 reimbursed
by the employer to the employees for medical treatment
of employees or his family member are tax-free.
Accordingly, employee ends up paying tax on any
sum reimbursed over and above Rs 15,000.
With increasing healthcare costs, the existing tax
free limit of Rs 15,000 should be suitably increased.

Transportation expenses:
 
The transportation allowance granted by the employer
to his employee for commuting between the place of
work and residence is tax-free to the
extent of Rs 800 per month. This limit was fixed
more than a decade ago, and definitely needs
to be revised upwards given the rising commuting
costs across the country.

Tax relief on contribution to superannuation fund in excess of Rs 1,00,000: 

 
Currently employers contribution to superannuation fund in
excess of Rs 1,00,000 is taxed in employees hands. Employees
should not be made liable to pay tax on such contribution the
benefit of which may or may not arise and the benefit is
subjected to tax at the time of actual receipt.