In an effort to make the tax policies and administration user friendly several measures have been taken by the government in last 9 months. However, the common man has lot of expectations from the budget.
Owning a house a reality: The biggest dream of a common man is to own a house and the delayed possession of builder projects have caused significant hardship. Adding to the woes of the taxpayer the deduction of interest on housing loan in respect of a self occupied property is capped at Rs 200,000, which is further capped at Rs 30,000 where the construction is not completed within a period of three year. It is expected that the deduction of interest on housing loan is allowed without the cap of Rs 30,000 from the year in which the possession was due as per the agreement with the builder. Also, the current limit of Rs 200,000 is insignificant given the ticket sizes in cities like Mumbai.
Bring NPS on a level playing field: National Pension Scheme (NPS’s) current tax structure is exempt-exempt-tax, which is at a disadvantage to other major retirement products such as the Employees Provident Fund (EPF) and the Public Provident Fund (PPF). It is high time that the government removes the anomalies and inconsistencies in the taxation of the NPS and gives it the EEE status in order to encourage retirement savings.
Self-employed should be treated on par with salaried: House rent deduction of Rs 2,000 for self employed under section 80GG is too low as compared to deduction on account of House Rent Allowance (HRA) available to salaried persons, which can be substantial in cases where the salary and its HRA component are high. To encourage the youth to be self employed, house rent deduction under section 80GG should be revised considering the rentals in metros.
Only education can empower a country: Providing education to children is an important goal the parents. Though the tuition fee is allowed as a deduction, even the long-term savings for higher education should have tax benefits. Tax advantage investment scheme in the USA (like 529 plan) for higher education of children is a good example and even India can have child education funds that offer tax deduction on the contribution. To safeguard the corpus for child education, the fund can cap the exit for payments to educational institutions only where the child takes admission and levy a penalty on withdrawals for other purposes.
Widening the tax base to evenly distribute the tax burden: Tax is necessary for the growth of our nation, but the burden should not be only on a few of us. In order to widen the tax base of our country, in addition to spreading awareness amongst the taxpayers and forming PAN camps, the government has also taken definitive steps by mandating quoting of PAN for various transactions and putting a cap on cash transactions.
Equitable opportunities for every section of the society would fuel an all-inclusive economic growth for India. We are hopeful that government’s intention of wholesome growth and sustainable development is also evident from its most awaited action i.e. the budget proposals.
The writer is managing partner, Nangia & Co