Yes. It’s that time of the year again when the common man, the salaried person looks out to what’s in store for them – concessions, rebates. The Union Budget for the next fiscal shall be announced early this year on February 1, 2017 and the common man awaits.
Expectations from the Government are that they will take some measures to help the common man, especially the salaried class, who has rallied behind it’s decision on demonetization despite suffering a lot post the notes ban.
People at large are expecting that either tax benefits for individual taxpayers be substantially increased or instead of a plethora of deductions one ad-hoc benefit like the erstwhile standard deduction be introduced. This would simplify tax computation, reduce administrative burden and curtail unnecessary litigation associated with these tax concessions.
Under the current law, there are only a few tax concessions which are now practically available to individual tax payers.
Here is a tentative wish list from the Budget for the salaried class:
1. Tax slab rates should be revised upwards and minimum limit for taxable income be raised
There should be some upward revision in the income-tax slabs, the general expectation being exemption limit to be raised to INR 4 lakh (from INR 2.50 lakh per annum at present), while the subsequent slabs can be as follows:
|Income Range||Rate of Tax|
|Above INR 4 lakhs to INR 10 lakhs||10%|
|Above INR 10 lakhs to INR 20 lakhs||20%|
|Above INR 20 lakhs||30%|
Consequent changes could also be forthcoming for senior citizens (60 years) to INR 500,000 and INR 600,000 for super senior citizens (80 years and above). If implemented, this will help alleviate the common man’s sufferings to some extent.
2. Allow higher deduction for interest paid on housing loan
The real estate sector is one of the key growth engines for a developing economy like India. It provides large-scale employment to unskilled and semi-skilled workers in the country, which is a need of the hour, to boost employment opportunities for a large scale population. “Keeping in view the government’s agenda of providing housing for all, it is imperative that tax concessions such as increasing the tax deduction for interest paid on housing loan from INR 2 lakh to INR 3 lakh be considered. This will also provide an immediate market to the banking services sector for investing their funds post demonetization windfall.
3. Deduction of rent paid where no House Rent Allowance is paid by the organization
Generally, organisations pay House Rent Allowance (HRA) to employees in order to ease the burden of rent and there is an exemption available under the tax laws on HRA. However, there are instances when organisations do not include HRA in the salary components.
When HRA is not paid by the organization, salaried individuals are being allowed a deduction of INR 5,000 per month under Section 80GG of the Income-tax Act. Considering inflation and high cost of living, especially in the metros, there is a need to increase this deduction to atleast INR 15,000 for metro cities.
4. Raise limit on allowances
Salaried employees are eligible to claim exemptions / deductions like medical reimbursement, conveyable allowance, meal allowances, travel allowance etc. These exemptions / deductions were fixed a long time ago. In reality, employees incur much more expenses of these nature and thus the tax benefit obtained is very little. There is need to re-look at these small concessions and align them with the current economic reality.
5. More incentives for NPS Investment
India is an economy where saving for old age or retirement continues to be encouraged and is also important in view of lack of Government’s financial support like in other parts of the world. Therefore, taxpayers should be provided with more incentives for investing in the National Pension System (NPS). Contribution to NPS can also be brought on par with the Employees Provident Fund or Public Provident Fund with respect to exemption of 100 per cent of the accumulated balance on withdrawal, subject to certain conditions.
6. Deductions under Section 80C:
The deduction limit under Section 80C of the Income-tax Act should be increased to say INR 250,000 from the current INR 150,000. This will allow individual tax payers to have more tax benefits as well as the Government to use that money for growth avenues such as infrastructure development.
After the historic announcement of demonetisation on November 8, 2016 the, common man is now is looking forward to the Finance Minister (FM) presenting the Union Budget 2017 for a simple and straight forward tax structure for individuals.
(Author is Managing Director (Tax and Regulatory Affairs) at Protiviti India)