People expect tax exemption limit be raised to Rs 3,00,000
Amarpal S Chadha
Ernst & Young
The Union budget 2013-14 is just a few days away and there are a lot of open discussions or wish lists on what can be expected in the current budget. The salaried class is in the queue, in addition to the corporate sector, with huge expectations on the budget hoping for some tax relief. Some of the expectations from a personal tax perspective are:
The first and foremost expectation of each taxpayer is on increasing the tax exemption limit. Currently, the exemption limit stands at Rs 2,00,000 for both men and women, who are less than 60 years of age and wish is that this limit is increased to Rs 3,00,000. It will allow more cash and spending power in the hands of the taxpayers and allow people to cope with the inflationary trends.
Next comes the deduction available on housing loan, where the existing limit is Rs 1,50,000 for the self-occupied house properties. Considering the interest rates and the current inflation, the deduction limit may be increased to Rs 2,50,000 or Rs 3,00,000. Also, the current cap of Rs 1,50,000 was introduced by the Finance Act 2001 with effect from April 01, 2002, and hence, the limit needs to be revisited.
The threshold for savings under Section 80C of the Income Tax Act can be increased from Rs 1,00,000 to Rs 2,00,000, which will allow salaried class to save some tax and also channelise their savings. There are certain areas in which amendments are welcome like the enhancement in cap for deductions/allowances. For instance, currently an individual can claim medical reimbursements only to the extent of Rs 15,000, this can be increased to Rs 50,000. Also, the limits for conveyance allowance (Rs 800 per month), children hostel (Rs 300 per month/child) and education allowance (Rs 100 per month/ child) needs to be revisited.
Considering the existing status of pension benefits for private sector employees, there is a need for an individual to secure his post retirement life. A standalone deduction for contribution to pension plan will add value to his savings kitty and to ensure better post retirement life.
With effect from last year, individuals who qualify as an ordinarily residents are required to disclose their foreign assets in their tax returns. The definition of assets has not been provided and the asset list can range from an expensive pen to a lavish bungalow. The definition of ‘foreign assets’ and a threshold to disclose these assets will improve the compliance.
Another expectation is revamping the entire tax refund process. The budget should provide for the introduction of strict timelines to grant the refund and interest due on the refund amount. Also, the status of refund should be regularly updated online for the benefit of taxpayers.
Currently, a motorcar is covered under the definition of ‘specified assets’ for the purpose of charge of wealth tax. This requires to be revisited to exclude one motorcar from the specified assets or introduce threshold for the value of car.
The provisions relating to taxation of employee stock options (ESOPs) requires consideration. ESOPs should not be subject to tax on notional perquisite value and should be taxed only on gains arising due to sale of such shares to avoid cash flow issues for the employees.
Well, the list may never end with the expectations of salaried class. As always, expectations are infinite but one needs to wait and watch as to how much of these will turn into reality in the current budget.
(The author’s views expressed are his own)