Budget 2018: Budget declaration date 2018 is nearing and India budget will be presented on February 1. Union budget 2018 will be presented by Finance Minister Arun Jaitley in Parliament. Modi government’s budget India 2018 will be crucial as this will be last full budget before the 2019 Lok Sabha polls. This budget is also assumes political significance as a number of assembly polls will be held. The Union Budget is likely to address a few issues- income tax exemption, goods and tax services (GST). Economic Survey 2017-18 was tabled yesterday. Economic Survey has shown the overview of the current state of economic affairs in the country. Students are expecting a few things from the Modi government on the budget date.
Revamp Section 80e dealing with deduction of interest paid on education loans
Section 80E of the Income-Tax Act,1961 allows a deduction from taxable income in respect of the interest paid on an education loan taken for higher education . This benefit is available only for eight financial years starting from the financial year in which taxpayer commences repayment of loan.
Revamp and expand the scope of section 80E to make it job-oriented
The term ‘higher education’ has a narrow definition for section 80E purposes and is education-oriented and not employment-oriented “Higher education” means any course of study pursued after passing the Senior Secondary Examination or its equivalent from any school, board or university recognized by the Central Government or State Government or local authority or by any authority authorized by the Central Government or State Government or local authority to do so. . The scope of deduction under section 80E needs to be expanded from deduction in respect of interest on loan taken for higher education to also include interest on any loan taken to pay for any vocational course whether Government recognized or not that would enable the individual to take up a job or self-employment. This will make the whole fiscal incentive job-oriented also. This will also help reduce the mismatch between what the industry wants and the education or skill set that students acquire.
Remove the cap of 8 financial years in section 80E for allowing the deduction
Deduction under section 80E is available only for eight financial years starting from the financial year in which taxpayer commences repayment of loan. This makes it too rigid. Over a period of time, fees paid by student increases. Also rate of interest on education loan also changes as per liquidity in the system. The increasing NPAs in education loan would also drive the interest rate upwards. All these factors tend to influence the repayment term of the loan . So, deduction be allowed to payment of interest during the tenure of the loan even if be more than 8 years. The Modi government will look into the issue on Budget day.
Interest rate subsidy for those who repay the loan and interest punctually
Government should introduce an incentive scheme whereby those who repay punctually would get certain number of instalments towards the end of the loan tenure waived off in Union Budget. Alternatively, an interest subsidy may be credited to bank account of the taxpayer (assessee) the day he repays the last instalment. This will reduce the cost of education loans, reward honest borrowers and help reduce the NPAs on education loans.
Double section 80c limit from Rs. 1,50,000 to Rs. 3,00,000
The limit for section 80C deductions in section 80CCE is presently Rs.1,50,000 which is woefully inadequate in today’s circumstances where cost of education has gone exponentially. This limit should at least be doubled from Rs.1,50,000 to Rs.3,00,000 in India Budget 2018.
Expand the scope of section 10(16) which exempts from tax scholarships so as to tax-exempt stipends also
Phd. Students received stipends ranging from RS.35,000 to Rs.40,000 per month. It would alleviate their hardships if scope of section 10(16) is expanded to tax-exempt stipends also in Budget 2018.
Increase tax-free limits of children’s education allowance and hostel expenditure allowance
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The present tax-free limit of Children’s Education Allowance is Rs.100 per month per child upto a maximum of 2 children while tax-free limit for Hostel Expenditure Allowance is Rs.300 per month per child upto a maximum limit of two children. Thee tax-free limits are ridiculous in today’s circumstances where Rs.100 per month will not even be sufficient pocket money for a child. Children’s Education Allowance be made tax-free upto at least Rs.3000 per child per month for maximum 2 children and Hostel expenditure allowance be made tax-free at least upto Rs.6000 per child per month for maximum of 2 children. Of course, these limits are contained the Rules rather than the Act and increasing these limits by amending the Rules can be an off budget exercise at any time of the year. However, it will give adequate solace to the middle-class if covered in the Budget Speech.
Article by Mr Srinivasan Anand G, Senior Consultant, Taxmann