Raise Tax Exemption Limit To Rs 3 Lakh At Least
Tax & Regulatory Services, EY
This year saw a spiked interest in the government polls; the common man’s depth of anticipation also touched a new level during the elections which were met well with the overwhelming majority. And now comes the great expectations from the new government on the budget.
The common man is eagerly waiting for the budget to be presented by the finance minister, which promises not to be a populist budget. The budget is expected to result in the increase in the spendable income of the common man.
Some of the expectations of a common man include increasing the existing exemption limit of Rs 2 lakh. This limit has been increasing marginally every year over the past few years, but in comparison to the rate of inflation, the exemption limit still remains at an unsatisfactory level. The current exemption limit should be increased to at least Rs 3 lakh for the ordinary man to meet his current standard of living. The increase in exemption limit will incentivise people to be covered in the tax net, ensure higher collection from greater compliance and encourage savings and consumption.
There has been a steep rise in the cost of medical services over the years. The current exemption limit of Rs 15,000 for medical expenses under the Income Tax Act, 1961 needs to be accordingly revised to meet the increased cost of medical services.
With the fuel prices rising steadily, the transport allowance given for a person needs to also be increased proportionately. There is a huge correction which is needed in this area. What could be bought for Rs 100 a few years back is not available even at Rs 200 now. The limit of tax free conveyance allowance of Rs 800 per month is extremely low as compared to the high cost of commuting. What is worse is that the already high cost of fuel is only expected to rise with the passage of time. Under such circumstances, a mere allowance of Rs 800 per month is not sufficient and hence, this limit should be at least increased to Rs 3,000 per month.
In the current times, the cost of providing education to children does not come at a small price. Where the issue of choosing schools and schools choosing children for admission is gaining momentum,the financial relief from burden of funding education is another devil one needs to deal with. The tax free limit fixed for children education allowance of Rs 100 per child per month seems to not only be redundant and archaic, it is also impractical and of no real benefit to the common man. The actual expense incurred for education is nowhere in the range of a few hundreds. This limit should be increased alteast to Rs 2,000 per month.
The limit of Rs 1 lakh for claiming deduction under Section 80C of the Income Tax Act, 1961, is again too low. A fresh approach should be taken by the new government and the limit of Rs 1 lakh should be increased to Rs 2 lakh. The increase in limit under Section 80C would in turn promote investments if relief is granted for investing into certain types of investments and will lead to increased purchasing power of people.
Further,at present Section 80C covers expenditure on tuition fees paid for the education of children. The deduction can be availed on account of such expenditure but within the limit of Section 80C. However, the objective of providing deduction under Section 80C is to encourage investment habits of the individual. Therefore, a separate section on such expenditure over the limit prescribed under Section 80C should be introduced since tuition fee does not fall into the category of investments.
In today’s time, when an ordinary man wants to own a home, buy a car, send his children to respectable schools, the finance is also expected to be funded through the loans taken from the financial institutions. The limit of providing deduction of interest on loan taken for building or acquiring a house which is used for own residence is fixed at the un-revised value of Rs 150,000. This again, despite the high rate of interest charged by banks has not seen an upward revision. This limit too should be looked at with a fresh view to actually provide some reasonable benefit to the common man.
Income-tax refunds should be processed faster in addition to everything else and control and checks should be placed by the government to avoid unnecessary litigation.
The areas of change and scope of expectations are wide-ranged - what the common man awaits is a budget that will counter the effects of inflation and increase spendable income in the hands of the tax payer. The common man is literally banking on the BJP slogan - achhe din aane waale hain.
Views expressed are personal.