Make it less taxing

PARIZAD SIRWALLA | Updated on January 12, 2018 Published on January 12, 2017


Enhance deduction limits; care for the salaried

The common man seems to be looking to the upcoming Budget to pass on certain benefits to him as a fallout of the demonetisation. Considering the windfall gains that the Government may have owing to increased tax revenues, there would be some scope to realign the tax slabs to the taxpayer’s advantage.

Many hope that the individual basic exemption limit would be enhanced to at least ₹300,000 per annum from the existing ₹250,000 per annum. Further, the tax slabs may also be rearranged so that the peak rate of 30 per cent is triggered, on income above ₹20 lakh a year as against the current ₹10 lakh. This can help enhance the disposable income in the hands of the taxpayers which could have a direct bearing on their savings and consumption.

Change deduction limits

As we all know, a deduction limited to ₹150,000 per annum is available under Section 80C of the Income-tax Act, 1961 (‘the Act’) towards various specified investments. While this limit was enhanced by ₹50,000, two years back, there could still be some room to enhance this to at least ₹300,000 a year.

With the increase in banked funds over the past couple of months, increased tax deduction limits may encourage the utilisation of these funds towards desired long-term investments.

Also, restoration of tax deduction towards investment in infrastructure bonds (earlier under Section 80 CCF of the Act) could stimulate growth in the infrastructure sector.

Currently, a deduction limited to ₹10,000 per annum is available under Section 80TTA of the Act, only towards interest on savings bank deposits. The Government may extend this to fixed/term/recurring deposits, etc. while also enhancing the deduction limits to at least ₹20,000 per annum.

Relief for salaried taxpayers

Salaried taxpayers are entitled to limited deductions from their taxable salary income, towards legitimate expenses incurred by them. It is therefore hoped the standard deduction which was earlier available to them till fiscal 2004-05, be reintroduced with a minimum limit of ₹50,000 per annum to ease their tax burden and bring around tax parity vis-à-vis the self -employed taxpayers.

Also, upward revision of age-old limits of certain tax saving deductions/exemptions is being hoped for, to compensate for the increased cost of living. Amongst the popular ones, with respect to tax free medical reimbursements, there is an expectation to increase the limit to at least ₹50,000 per annum from the current ₹15,000. With respect to Leave Travel Allowance (LTA), which is now available for two journeys in a block of four calendar years for travel within India, it can be realigned to at least one journey in each financial year and also extended to include overseas travel, which has become common owing to reduced airfares.

While the common man’s expectations from Budget 2017 are soaring high, one should be mindful of the overall objective of the Government, which is to curb the menace of black money and encourage wider tax compliance, So, with the benefits, one can also expect enhanced disclosure requirements in the tax returns forms and documentations requirements for the tax deductions, to achieve better tax compliance.

The writer is Partner and Head, Global Mobility Services, Tax, KPMG India. The views are personal

Published on January 12, 2017
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