Budget 2016 and income tax: Top 5 points on how to resolve common man’s woes

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Budget 2016 and income tax: In an effort to make income tax policies and administration user friendly several measures have been taken by the government in last 9 months. However, the common man has a lot of expectations from the budget. 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. With FM Arun Jaitley set to present the Union Budget 2016 on 29th February, here is a 5 point how-to list to provide income tax relief to the common man: (PTI)

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Budget 2016 and income tax: 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.

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Budget 2016 and income tax: 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.

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Budget 2016 and income tax: 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.

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Budget 2016 and income tax: 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.

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1. Budget 2016: No one escapes taxes! You got to pay taxes! But planning for taxes is generally ignored. At the end of the year, accounting for your income and filing returns is inevitable. So why not have a plan for it? Read up about tax saving and investing. Investing in tax saving tools right from the time you start earning is a wise thing to do. One can claim deductions and save by investing in PPF, EPF, ELSS and many other listed under section 80C.