Budget 2016 – Some gains for taxpayers, lots left undone

By: | Published: February 29, 2016 5:19 PM

The Budget 2016 offered a few reliefs for the small tax-payers. While the general slab rates applicable for individuals has remain unchanged, a nominal increase in the ceiling of tax rebate under section 87A of the Income-tax Act, 1961 from Rs 2,000 to Rs 5,000 has been proposed to lessen tax burden on individuals with income upto Rs 500,000.

jaitley reu LFrom tax administration point of view, ‘e-Sahyog’ scheme is planned to be expanded to reduce the compliance cost, especially for small taxpayers. (Reuters)

The stage was set for Finance Minister Arun Jaitley to present his third Union Budget amid tough economic scenario in the country and huge expectations trending around the nation. While the Finance Minister tried to do his bit to meet the expectations of the common man, the question is – is it enough?

The Budget 2016 offered a few reliefs for the small tax-payers. While the general slab rates applicable for individuals has remain unchanged, a nominal increase in the ceiling of tax rebate under section 87A of the Income-tax Act, 1961 from Rs 2,000 to Rs 5,000 has been proposed to lessen tax burden on individuals with income upto Rs 500,000.

Also, there is an increase in the limit of deduction of rent paid under section 80GG of the Act from Rs 24,000 per annum to Rs 60,000, to provide relief to self-employed assessees living in rented accommodation.

Further, in order to encourage housing sector, an additional deduction of Rs. 50,000 (over the existing limit of Rs 150,000) is proposed to be allowed for the first-time home buyers, who have taken loan of upto Rs 35 lakhs to buy property having value not exceeding Rs 50 lakhs.

A limited tax-exemption has also been granted on withdrawal up to 40% of the corpus of National Pension Scheme at the time of retirement. From tax administration point of view, ‘e-Sahyog’ scheme is planned to be expanded to reduce the compliance cost, especially for small taxpayers.

For small businessmen and professionals, relief comes in form of raising the turnover limit under presumptive taxation scheme under section 44AD of the Act to Rs 2 crores from the existing Rs 1 crore and expanding the presumptive taxation scheme with 50% deemed profits to small scale professionals with gross receipts up to Rs 50 lakh.

While the aforesaid measures are welcome, there are certain misses concerned in light of the huge expectations of the small taxpayers’ community.

No revision has been proposed to the antiquated exemption limits for various allowances such as child education allowance, hostel expenditure allowance etc earned by salaried class which required immediate attention to make such special allowances useful to salaried employees in real sense.

No upward revision has been made in the quantum of deduction available under section 80C of the Act on account of certain investments/ payments. One can say that overall, the Budget does bring something for the small scale tax-payers to cheer about, but could have brought more of it.

The author is partner in Nangia & Co

 

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