CMA Ramesh Krishnan
Introduction: Union Budget for the year 2014-15 going to be presented by the Finance Minister during forth coming budget session in the Parliament. Increase the economic growth & control the inflation are the major expectation from this budget by all. However each and every sector, person prospective, the expectation from this budget will be differ, in this article, myself here try to cover the some of the expectations by a salaried case from this budget.
1. Enhancement of basic exemption limit: Every individual has the expectation from this budget is to enhance the basic exemption limit from the current limit of Rs.2 Lakhs. In the view of current inflation & price level, the enhancement of basic exemption limit will lower the tax of an individual and increase the spending habit.
2. Revision in conveyance related allowances: Current exemption limit of transport or conveyance allowance u/s. 10(14) Rs. 800 per month has been fixed long years back. However the fuel price has been increased twice or thrice comparing old rates. But the limit of conveyance or transport allowance still in the same limit. The same issues are facing in the valuation of car perquisite which contains the fuel expenses. These limits related to fuel expenses can be relook by the government.
3. Revision in the medical expenses related exemption: The exemption of reimbursement of medical expenses limit of Rs.15000 per annum is the very low limit comparing the cost of medical expenses in current scenario. This can be relook and correct the limits.
4. Revision in education allowances: The exemption of educational allowance Rs.100 per child per month & hostel expenses allowance Rs.300 per child per month is the limit fixed long back. The same limit can be revisited and correct according to the current cost of education.Even though the deduction of tuition fees allowed under section 80C up to Rs. 1 Lakhs, expenses other than tuition fees also is the major amount in current educational costs.
5. Deduction in respect of notice period pay: This is most debatable issue during the change of employment. If employee resigns from the current employer and going with serving notice period, the payment made by the employee to employer to compensate will be deducted from his salary payable. But as per tax calculation it will be shown as income but there is no clear provision in deduction for the same. So it can be considered in this budget.
6. TDS problems facing by individual: Common problem facing by salaried individual/ non salaries case also is that TDS credit is not reflecting in the form 26 AS and unable to match the TDS amount. Even though TDS amount recovered from the income and deductor fails to pay the TDS or not update the TDS return, it is not reflecting in the form 26AS. This is very embracing situation for any person, after paying tax also not getting credit due mistake of others. Even though some recent judgements are favoured to the deductees, however this has to be provisioned in the act itself to avoid the litigation issues.
Conclusion: As per the purview of income tax act, Salary income is treated as risk free nature, hence most of the part of income is fully taxable, however the expenses depends on the inflation and other factors has to be revisited by the department and may make the changes accordingly. It is the very basic expectation from the upcoming budget by the salaried cases.
Author Bio
Mr.Rajesh, thank your for your fair observation. The interest that is payable for later deposit is penal in nature.
I fully concur with you that the interest that they pay to assessee’s refund must be same as that they collect for delay in paying the tax.
Regarding 30 – 35 % for delay in filing, if made, will be welcome provided the refund interest is also raised to the same level.
I concur with you that the delay in deposit should not be viewed as default in paying the tax.
In our setup, salaried class are victims as there is no scope to manipulate while I am yet to come across a single businessman who is making tax as per actuals. Change in within ourselves as also the day even agricultural income is taxed, with a zero percent for certain category will generate huge revenue to govt.
1. Exemption limit up to Rs. 5 lacks ( as per Arun Jaitley’s statement before becoming FM of India) though BJP once proposed to make it 7 lacks before 2009 Loksabha election.
2. Conveyance allowance up to Rs. 3000/- p. m. for cities like Delhi, Mumbai etc.
3. 30% tax slab above Rs. 20 lacks
4. Medical reimbursement exempted up to Rs. 50000/- pear year.
5. Section 80C limit to Rs. 2 lacks
6. Making LTC tax exempt every year instead of once in two year/two in 4 year block, this will also promote tourism.
Mr.S.Sudarshan,
Let me clarify.
4.5% was not fine but it was interest. my point was that when department can use tax payers fund for uncertain period and is liable to pay only 6% per annum interest on refunds, then charging such a hefty interest is not justified.
you rightly said that rules exists in law, but at the same time it should be noted that lawmakers induct such rules because we sit quietly and allow them to make laws irrespective of whether they are justified or not.
what will be your comment if rule are made to pay 30 or 36% pa interest on late payment of income tax ?
my point is whatever interest or penalty is charged by making laws, that should be applicable to the departments also. they can make law to charge a penalty of Rs. 1 Lac for non filing of returns in stipulated time but at the same time department / officer should be penalized if returns / refund is not processed in stipulated time.
Mr.Krishna Lokapur:
Weather PF is made compulsory or not, we have to keep in mind, the company will have a fixed CTC (cost to company) and how that goes to employee is not worried. The employees who are covered by PF or pension or not should be educated about the need to pave deposits like PPFand pension fund without waiting for emploer to open one for him. Ulitimately it is beneficial to employee.
PF employees deduction as well as employer contribution should be made compulsory as now-a-days all employers escaping from PF contribution by showing salary of employees morethan Rs.6500/-. By adopting this those who are drawing a salary of Rs.6500/- or whose basic salary shown in salary slip is more than 6500 are not getting PF benefits. A min of Rs.780/- should be made compulsory irrespective of employees salary more than 6500/- so that all will get benefits in regards to their safety as well as under IT 80 C.
PRE BUDGET MEMORANDUM FOR 2014
1. Income-tax threshold exemption limit: Threshold income-tax exemption limit should be increased to Rs.3 Lacs for all and for senior citizens to Rs.5 Lacs.
2. Revision of Tax slab: Following tax slab may please be considered for Individual, HUF, AOP and BOI.
(i) 3 Lacs – 6 Lacs – 10%
(ii) 6 Lacs – 15 Lacs – 20%
(iii) 15 Lacs – 30 Lacs – 25%
(iv) Above 30 Lacs – 30%.
For companies and firms/LLP, income upto Rs. 10 Crore should be taxed @ 25% and income above Rs.10 Crores should be taxed @ 30%.
3. Definitions – Section 2 (43) : Definition of tax should clearly mention whether it includes “surcharge and education cess” or not.
EXEMPTION UNDER SECTION 10:-
(i) Children Education Allowance [Rule 2BB (Sl. No.5 of Table)]: Children Education allowance is exempt at Rs.100/- p.m. per child upto maximum of two children. This limit is very old and should be suitably increased to Rs.500/- p.m. per child upto maximum of two children. This limit should be increased to Rs.1000/- p.m. for a girl child.
(ii) Allowance to meet Hostel Expenditure on child [Rule 2BB (Sl. No.6 of Table)] : Allowance to meet hostel expenditure on child upto a maximum of two children is exempt at Rs.300/- p.m. per child upto maximum of two children. This limit is very old and should be reasonably increased to Rs.1,500/- p.m. per child upto maximum of two children. This limit should be increased to Rs.2000/- p.m. for a girl child.
(iii) Transport Allowance [Rule 2BB (Sl. No.10 of Table)]: Exemption of conveyance allowance of Rs.800/- p.m. is too low. In today’s scenario most of the employees use their own vehicle for coming to office and incur not less than Rs.5,000/-/Rs.3,000/- p.m. for running and maintenance of their car/two wheeler. Even those who use autos/public transport system, incur not less than Rs.3,000/- for transportation to and from office. The exemption may kindly be suitably increased to at least Rs.3,000/- p.m.
(iv) Leave travel concession u/s 10(5): In order to encourage travelling and thereby boosting economy, leave travel concession for actual journey should be exempt every year instead of the present exemption in alternate year. Other incidental expenses incurred during journey should also be exempted upto Rs.10,000/-.
Note: Since the finance ministry is set to induct ‘Direct Tax Code’ at the earliest, I would like to advise that the above referred exemptions may be removed from the statute and alternatively “Standard Deduction” upto 20% of ‘Income under salary’ or Rs.1,00,000/- whichever is less may be introduced to simplify the tax system.
4. Exemption to any university or other educational institution existing solely for educational purposes and not for purposes of profit [Sec.10(23C)(iiiad)]: The prescribed limit of annual receipts is Rs. 1 Crore for eligibility for exemption of the institution. The limit should be increased to Rs. 2 Crore looking to the present scenario.
5. Exemption to any hospital or other institution for the reception and treatment of persons suffering from illness or requiring medical attention or rehabilitation existing solely for philanthropic purposes and not for purposes of profit [Sec.10(23C)(iiiae)]: The prescribed limit of annual receipts is Rs. 1 Crore for eligibility for exemption. The limit should be increased to Rs. 2 Crore looking to the present scenario.
6. Medical exemption limit u/s 17(2): Reimbursement of medical expenditure is exempt in the hands of employees upto Rs.15,000/-. This limit was increased from Rs.10,000/- to Rs.15,000/- by the Finance Act, 1998 w.e.f. 1.4.1999. The limit as revised in 1998 is nearly 15 years old and due to phenomenon increase in cost of medical expenditure since then, the limit needs to be increased to Rs.50,000/-.
7. Deduction for housing loan interest u/s 24: The present deduction of interest upto Rs. 1.50 Lacs on housing loan in case of self-occupied house property is low looking to the high cost houses generally available now. This limit should be adequately increased to Rs. 3 Lacs.
8. Deduction u/s 80C on investments in specified instruments: The limit for deduction u/s 80C should be increased to Rs. 2 Lacs which should specifically include Rs.50,000/- for tuition fees paid for education of children.
9. Deduction for Notice period pay: Income from notice period pay is chargeable in the hands of ex-employer and deduction of the amount of notice period pay paid be made available to the employee as he has not effectively received that income.
10. Deduction under section 80CCF in respect of subscription to long-term infrastructure bonds: Our country needs infrastructure development in a big way. Further the new Govt. in its election manifesto stressed need for running bullet trains in the country. Hence, section 80CCF should be re-introduced to allow deduction upto Rs.30,000/- on investment as per rules framed under this section.
11. Deduction under section 80CCG in respect of investment made under an equity savings scheme: Deduction under this section should be allowed for 100% of the investment instead of 50%. The investor does not seem to be encouraged to invest under the scheme formulated under this section. Further, the interest rate is low which gets taxed ultimately.
12. Deduction under section 80EE in respect of interest on loan taken for residential house property: Sub-clause (3) (i) should be amended to consider deduction for loan sanctioned during the period from 1st day of April, 2013 and ending on 31st day of March, 2015 instead of the existing period from 1st day of April, 2013 and ending on 31st day of March, 2014.
13. Deduction for re-payment of principal amount of loan taken for purchase of first and one time residential house property: Provision should be made in the Act for deduction upto Rs. 1 Lac for repayment of house loan taken first time to purchase house for self occupancy. The said deduction should be allowed consecutively for 5 assessment years.
14. Deduction under section 80L: Provisions of this section should be re-introduced to allow deduction of Rs.20,000 for interest from financial institutions against deposits including savings bank interest which is at present allowable u/s 80TTA upto Rs.10,000/-. This deduction should be available upto Rs.30,000/- to senior citizens whose earnings are mainly from deposits with financial institutions including banks.
Either section 80TTA should be modified to the above extent or section 80L be re-introduced to take into consideration the same.
15. Deduction under section 80P(2)(a)(i) to Co-operative Societies: The deduction of Rs.1 Lac available to Co-operative Societies is very old and looking to general exemption limit to Individual or HUF, this limit should be increased at least to Rs.2 Lacs or Rs.3 Lacs based on the general threshold exemption limit..
16. Depreciation u/s 32: Depreciation for plant & machinery and motor cars should be restored to 20% of the WDV. By way of explanation, intention of statute should be clearly provided whether additional depreciation of 10% is allowable in the succeeding year in case of new plant & machinery installed for less than 183 days in a year.
17. Section 50C: Provisions of section 50C should be made simpler as it encourages taxing of notional amount which the assessee has not actually realized in the course of sale of land or building.
18. MAT u/s 115JB: Tax rate of MAT should not be more than 15%. Section 115JB should clearly define meaning of tax to include surcharge and education cess, if any.
19. MAT Credit u/s 115JAA: By way of an explanation, intention of statute should be provided whether the carry forward MAT shall include surcharge and education cess or not, to avoid litigations.
20. Requirement to furnish Permanent Account Number (Section 206AA): In case where Double Taxation Agreement with a country exists, there should not be mandatory requirement for furnishing Permanent Account Number of the foreign party in order to deduct tax at the rate provided in the treaty. For obtaining PAN from the foreign party, a lot of time is wasted and a duly filled up and signed form no.49AA is to be called for from the foreign party and submitted to the Indian tax authority. Foreign identification no. of the party should be sufficient compliance.
21. Interest u/s 244A: There should be a clear provision for allowance of interest on interest wrongfully withheld by Department for a longer period. This matter has travelled to Hon’ble Supreme Court who has decided in favour of the assessee in the case of M/s Sandvik Asia Limited.
22. TDS under chapter XVII: It should be clarified by way of explanation whether TDS is to be deducted on the amount including service tax or on the amount excluding service tax.
23. Rate of service tax: Rate of service tax should be lowered to 10% instead of the present rate of 12% as it is seriously impacting the house purchasers. Further, there should not be any service tax on food served in a small AC restaurant/by an outdoor caterer. It increases cost of food on which State Governments are already collecting VAT @ 14% or 15%.
24. Increase in limit for Provident Fund contribution by companies: Contribution of companies towards ‘Employees Provident Fund’ should be increased to 15% from the existing 12%. Further, the companies should be required to contribute at least 10% of the PF contribution amount to the ‘Employees Pension Fund’. Provisions of the pension fund should be suitably amended to pay pension commensurate with the increase in dearness allowance as applicable to Government employees to the existing and the future pension holders. There should be no tax on the monthly pension amount received under ‘Employees Pension Scheme 1995’.
The impact of dearness allowance can be made applicable in case of EPF Pension Scheme 1995 by giving an option to the pension holders to pay certain amount to the pension fund for being eligible for getting the pension alongwith increase of the pension amount from time to time due to increase in the dearness allowance.
Krishna Kumar Sarawagi
Hyderabad
Ph; 9542961907
Mr.Rajesh, Mumbai has diluted the title of this post by speaking about other issues connected with income tax.
However there should be amendment to bring the same interest for later refund and late payment of tax. Penalty for non payment etc can be anything but late payment must be dealt just like late refund.
Dividend distribution tax must go. Why double taxation.
Govt imposing file of 4.5% is justified when the rule exists. His terming it as ridiculous was avoidable. Responsible citizen is expected to comply with the rules and regulation; disagreeing is one thing and non-complying is totally different.
1) Interest @ 1.5% of tax not deposited is payable U/s 201(A). Punishable with rigorous imprisonment for a term which shall not be less than three months but which may extend to seven years and with fine under Section 276(B).
Provisions of Penalty, Fine and Imprisonment are very harsh.Same provisions must be applied in case refund is delayed by department beyond three months of filing of Returns. Officers must be made accountable.
I will give one example how Law with such provisions exploit tax payers.I had deducted TDS on 31st Dec which was to be paid before 7th January. For some reasons, it was delayed by 3 days and I paid it on 10th. I received a notice from department which required me to pay 4.5% interest (for a delay for 3 days.). It is ridiculous.
Department pays interest on refunds at 6% pa but charges 15% pa on delay of tax payment. Is it fair? In fact, it should be vice versa because department has unlimited powers to recover due taxes but poor tax payers has to get its refunds at department’s mercy like department is highly obliging him. In India, there are hardly 3% regular income tax payers and government in spite of increasing tax base, continues to make such draconian and redundant laws to loot existing tax payers.
2) Raise Wealth Tax Limit to Rs. 1 crore.
3) Raise Minor Income addition to Rs.10000/-.
4) Abolish Dividend distribution tax (DDT) which is nothing but double taxation. Companies have to pay Income tax on profits and again DDT when these post tax profits are distributed to shareholders.
5) Abolish 2% and 1% E and HE cess which is a Nuisance.
Earlier government has formed every law to keep tax payers in stress and busy in compliance. Today half of time of a business man is wasted in compliance as there are so many laws catching him from all side.
MODI government is expected to simplify tax laws and officers should be trained to treat tax payers as customers.
The write is shy of giving the figures that the FM should give!
1. Exemption limit should be to raised to 5 lakhs ( as per Arun Jaitley’s statement before becoming FM of India)
2. The conveyance allowance limit for exemption should be increased to Rs.3000/- pm for A and A+ cities and 1500 for the rest of the places.
3. Medical allowance/exemption/reimbursement to min 50k in general and ALL THE EXPENSES IN CASE OF CANCER AND NEUROLOGICAL diseases in particular
4. Section 80-C to 2 lakhs
5. 10% tax from 5lakhs to 8lakhs and 20% from 8 lakhs to 15 lakhs and 30% above 15 lkahs.
This will be a fair expectation from Modiji and his govt.!