As February 28 draws closer, a lot of expectation has built up on the tax front as this will be the first full-year Budget to be presented by the Modi government. The government has previously conveyed its intention to simplify the taxation system and provide relief to taxpayers.
To start with, most taxpayers are expecting an increase in the exemption limit. The basic tax exemption limit for individuals should be raised from R2.5 lakh to R3 lakh. As an incentive to working women, tax exemption for them, too, needs to be increased to at least R4 lakh. Additionally, the peak tax rate of 30% should be made applicable over an income of R20 lakh for individuals.
To boost infrastructure, the benefit of Section 80CCF — which provided for a deduction of R20,000 in computing total income for subscribing to long-term infrastructure bonds issued by government-notified companies — should be reintroduced.
The benefit of Section 80CCF of the Act should be restored and the deduction of R20,000 earlier provided be increased to R50,000. This would allow an assessee in the highest tax-bracket to save up to R16,995. It is recommended that deduction be allowed on long-term infrastructure bonds issued by private companies as well.
The exemption limit under Section 80C was increased last year from R1 lakh to R1.5 lakh. Taxpayers are hoping for a further increase in 80C incentives to R2.5 lakh, which will boost investment and tax savings. Additionally, the government should provide a separate deduction limit of R1 lakh for investment in various life insurance products.
Exemption on interest from housing loan should be revised upwards from R2 lakh to R3 lakh.
Exemption limit on reimbursement of medical expenses was set at R15,000 in 1998. With the ever-increasing medical costs, a common salaried man expects the government to increase the limit to R50,000 so as to bring it in line with inflation.
Also, deduction for mediclaim insurance premium could be increased from R35,000 (self/ family — R15,000 and parents — R20,000) to R50,000.
Similarly, the exemption limit of transport allowance was set at R800 in 1998. This should be increased to R4,000 per month.
The education sector needs significant attention. The exemption limits of various allowances, such as children’s education and hostel expenditure — currently set at R100 and R300 per month — should be revised.
Considering that the monthly education expenses of children (allowed as deduction under the blanket deduction of R1.5 lakh) form a major portion of a family’s budget, the government should give a separate deduction for such expenses.
The writer is managing partner, Nangia & Co. With inputs from Neha Malhotra