The Hindu Business Line : Tax benefit for educating spouse, children

As it is, only the student pursuing higher education can claim interest on education loans as deduction under Section 80E. This condition deterred parents from taking such loans for the benefit of their children. Now, a person would qualify for this tax benefit even if the loan were taken for financing the education of his or her spouse or children. This is, as it should be, a welcome move that takes effect from the AY 2008-2009.

K. P. Dasarathy, Chennai

Has medical exemption been increased in the new budget?

There is no change in the provisions in this regard relating to income from salary. Therefore, the general exemption limit from tax for non-hospitalisation reimbursements by the employer remains at Rs 15,000. However, the deduction for Mediclaim premium paid has been increased by Rs 5,000. Accordingly, if you have a senior citizen in your family, the limit is Rs 20,000, otherwise the limit is Rs 15,000. This deduction of course is not unique to the salaried class and it is a deduction under section 80D from one's gross total income.

Suryanarayana Rao, Vijaywada

What is the new law on disallowance of cash expenses by businessmen?

The Finance Minister, Mr P. Chidambaram, has done a good job in this regard these last few months. First, midway through last year through the Taxation Law Amendment Act, 2006, he insisted on payment by an account payee cheque or draft as against the extant requirement of a mere crossed cheque or demand draft. He has carried this noble crusade against black money by proposing to disallow completely payments otherwise made as against the existing requirement, which irrationally disallows only 20 per cent of such payment. Complete disallowance would be the right deterrent against bypassing the banking system.

Mahesh Chandra Tyagi, New Delhi

Do you think increase in Distribution Tax is justified?

The share market obviously thought it was not justified. The heightened distribution tax of 15 per cent now as against 12.5 per cent earlier may apply brakes on dividend distribution and may, therefore, in a cynical way, be perceived as a step in the direction of capital formation by corporates. But more seriously, distribution tax continues to be the vexed problem of double taxation of dividend. This is now bound to get accentuated. The ideal regime would be the one that allows dividend as expenditure a la interest and taxes dividend in the hands of the recipients. But the government obviously does not want to let go of dividend.

Padmaja Pandiyan, Trichi

Why has Fringe Benefit Tax been imposed on ESOPs?

The IT industry, in particular, is peeved at the reintroduction of tax on ESOPs. But horizontal equity among employees requires that salary of all hues be taxed. Therefore, ESOPs should be taxed but in the hands of the benefiting employees and not in the hands of employers in the form of FBT, which is what is proposed in the Budget. FBT was designed to overcome the problem of pigeonholing the beneficiaries, which admittedly is not the case with ESOPs.

Shruti Marwah, Chandigarh

Don't women deserve greater increase in tax exemption?

The Finance Minister has apparently tried to be neutral to everyone in the matter of tax exemption. But, leaving a small sum of Rs 1,45,000 to 1,50,000, that is, Rs 5000 to be taxed at the first slab rate of 10 per cent does appear squeamish. I agree that a more wholesome relief could have been given by starting income-tax for non-senior ladies at the level of Rs 1,50,000, in the process bypassing the first slab rate of 10 per cent as has already been done for senior citizens of either sex.

Alka Ratnakar, Bangalore

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S. Murlidharan

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