Analysis of Union Budget 2017 provisions of Income Tax Service Tax Excise Duty Custom Duty with Budget Highlights Commentary Speech, Notification, News & Articles.
As earlier years, this year too salaried class had so much expectation from budget and as earlier years this year too they are disappointed after budget. No new deductions or no enhanced deductions, no rebate, no parity with self-employed/professionals (who are taxed on net income basis).
IT rates halved to 5% on income below Rs 5 Lakhs but benefit from rate cut is reduced by decreasing tax rebate to Rs 2500 from Rs 5000 for taxpayer with income up to Rs 3.50Lakhs which was earlier Rs 5 Lakhs. 10% surcharge is introduced for person having income more than Rs 50 Lakhs. Most affected person by surcharge will be salaried class as few taxpayers other than him will declare income which attract surcharge.
Corporate taxes have been assumed to grow by 8.4%in 2016-17 (vs 12.6% last year), personal income tax collections are expected to grow by 17% in 2016-17 (vs 14% last year). When corporate profitability is low and people are getting low hikes then on what ground government can think to increase personal income tax collections? Answer is just squeeze your cash cow – Salaried class
It felt being salaried class is a PAAP after seeing a businessman who is earning even less than us, live lavish life by paying lesser tax and that too without violating any rules. Survival in today’s corporates world is not easy. Employees have to complete unrealistic targets, scold by bosses, lives with fear of losing job etc. Even as loyalist taxpayer, what benefits he is getting? Should not he get priority over the queue at railway station, hospitals etc.? Government must have some sympathies towards them.
Salaried persons, the most honest person in matter of payment of income tax. Pay up to 35% of their GROSS earning as income tax but instead of getting some relief as loyalist taxpayers they are ignored year after year by government. Every year before finalizing budget, finance minister takes inputs from corporates, bankers etc. Why he not bothers to take inputs from his loyalist taxpayer and try to understand their problems?
The following will demonstrate that there is discrimination against the salaried class.
|Expenses||Treatment for salaried class||Treatment for self-employed / professionals|
|Taxable Income||Gross Salary (almost)||Net income after deducting all expenses|
|Payment of Tax||Monthly basis||Quarterly basis|
|Transport Allowance||Deduction available is Rs 1600 per month.||Actual amount incurred is allowed as deduction.|
|Lunch / Dinner||No deduction||Can claim entire amount as business development expense from his income.|
|Buying a Car||No deduction||Can claim entire interest expense as deduction. Further he can also claim depreciation on car and driver’s salary as expenses|
|Interest on self-occupied house||Exempt up to Rs 1.5 lakh per annum.||Can claim entire interest amount as well as depreciation on house as expenses provide that use that property for official use too|
|Training||No deduction||Full amount is deductible|
This is not the only lacunae. Some of deductions allowed to salaried class have been unchanged for decades.
Lastly I want to draw attention on this point,
Maximum exemption limit must be increased –In budget speech, FM said, people earning up to Rs 4.50 Lakhs should invest Rs 1.50 under section 80C, they can avoid paying tax for an income up to Rs 4.50 Lakhs. Looking at cost of living, running a family in such a small amount is very difficult and how to save so much. It would be great help if present limit is increase. Most affected person here too is salaried class as other taxpayer got deduction for all expenses and their net income comes lower than Rs 2.50 Lakhs even if they earning more than 10 Lakhs.
Salaried class needs to be taxed in a similar manner in which self-employed / professionals are taxed, that is all expenses should be allowed as deduction, only net income should be taxed and all exemptions should be done away with or substantially hike the caps for all allowances just by taking into account the inflation aspect or standard deduction must be back.
Efforts of government should be to increase the tax net and not milk the cow in their hands. Only 1.5% (1.90Crore) Indians pay income tax and more than half of this, pay less Rs 1,000. Over the years, number of income tax payers has fallen even though tax revenue has risen. Any shortfall in income tax collection should be made up by taxing people who are paying zero taxes and leading lavish lifestyles including rich farmers and politicians. is it justifiable that a rich farmer and politicians who has bungalows, SUVs servants etc. does not pay income tax but a salaried person who earns just Rs 25,000 pm and reach his office going through all the torture of public transport, pay income tax?
Read my another article on salaried person’s expectation from budget
Sources: Income Tax Return Statistics (A/Y 2014-15), NSSO 68th Round, Times of India