Budget 2018: With the Union Budget scheduled to be presented on February 1, all eyes are on the finance minister. The government should aim at making the Budget taxpayer friendly, straightforward and uncomplicated. Whenever it comes to the Budget, the primary focus is on the basic tax exemption limit. Given the inflation rate over the years and the need to rev up savings, the tax exemption limit of Rs 2.5 lakh which has remained unchanged since the last three years needs to be raised to at least Rs 5 lakh. Consequently, the slab at which the highest rate of 30% kicks in should be raised. The woes of the salaried class also need to be redressed owing to the fact that the salaried class usually ends up paying more tax as compared to those engaged in business/ profession. It is thus desirable that standard deduction be reinstated in the statute. A flat rate of standard deduction, of say 20%, can be fixed, subject to a maximum limit, in order to remove the disparity.
Expenses and allowances
Budget 2018: Further, the average expenditure to meet expenses of education, health, travel, living has gone up significantly. The present level of allowances and concessions in respect of the salaried class is inadequate. The Leave Travel Concession (LTC), which is currently restricted to the value incurred for travel and does not include expenses incurred on accommodation/ meals. LTC benefit should also not be limited to two journeys in a block of four years but should be allowed every year, and should include within its scope, the expenses incurred on accommodation and meals.
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Another example is the children education allowance which should be raised from Rs 100 per month to at least Rs 1,000 per month per child for maximum two children, or actual expenses, whichever is less. In fact, even the duration of education loan deduction needs to be enhanced. Instead of being restricted to a period of eight years, it should be made available for the full tenure of loan. The current exemption limit of various sections needs to be revised. Currently, deduction under Section 80C, for contribution in Public Provident Fund, National Saving Certificate, life insurance, etc., is Rs 1.5 lakh, which should be increased to at least Rs 3 lakh. Similarly, deduction under Section 80GG, given for rent paid by non-salaried employees, not in receipt of House Rent Allowance, is merely Rs 2,000 per month, which needs reconsideration and increased to at least Rs 10,000 per month.
Over the past few years, the government has been focussed on providing ‘Housing for All’. In pursuance of this motive and to encourage first-time home buyers, it is suggested that in this Budget, we should see an increase in the cap for interest on home loan deduction on self-occupied house property from Rs 2 lakh to Rs 3 lakh.
Relief to the elderly
Budget 2018: Falling interest rates have caused distress to senior citizens, who prefer to invest in fixed deposits. In order to provide relief to the elderly, the finance minister should give them an option to invest in low-risk hybrid funds for claiming deduction under Section 80C. Further, allowing a deduction of Rs 50,000 for their routine medical expenses would instil a sense of social security in our senior citizens. Alternatively, the non-taxable medical reimbursement, for self and dependants could be increased substantially from the current limit of Rs 15,000 to match the current needs. Furthermore, the scope of Section 80TTA, which provides for deduction of up to Rs 10,000 in respect of interest on savings account with banks, post offices, etc., could be enhanced to include ‘interest on term deposits’ also.
Easy filing of returns
Budget 2018: Taxpayers already use online portals for tax filings, wherein personal and tax paid information are pre-populated in the tax form. The government can take this a step further by sending pre-populated tax forms to taxpayers with information from their Form 26AS and other financial transactions linked to their Aadhaar and PAN. The taxpayer should have the option of reviewing and modifying the information before filing. This automatically generated tax return should be considered final unless the taxpayer modifies it before the due date.
The writer is managing partner, Nangia & Co LLP