When the aam admi listens to what Pranab Mukherjee has to say on March 16 on the Budget, the main focus will be on the tax burden they will have to bear for the next year to come.
When the aam admi listens to what Pranab Mukherjee has to say on March 16 on the Budget, the main focus will be on the tax burden they will have to bear for the next year to come. In fact, that is the most crucial thing that any household waits for every year. With high inflation and interest, some relief is urgently sought on tax issues.
Here are five taxe provisions that Pranab Mukherjee needs to rethink about:
1. Tax exemption on investment is allowed only up to Rs 1,20,000, which the common man feels must be increased. This includes principal of home loans, life insurance premium, school tuition fees and retirement funds which makes up for most of this money. This limit, if raised at least, to Rs 2 lakh will help raise the savings of Indian households.
2. Second, comes the income tax slabs which directly relates to the direct tax code. Right now the first income slab to be taxed is income above Rs 1,80,000 at 10 percent. What people could be happy with is perhaps the taxation slabs as mentioned in 2009 draft of direct tax code. The DTC says 10 percent tax up to Rs 10 lakh, 20 percent tax from Rs 10-25 lakh and 30 percent tax beyond that. Even if DTC cannot be applied this year, the first taxable slab must be brought up to Rs 2,00,000-5,00,000.
3. Third, comes the common situation when a husband gifts some part of his property to his wife. If the wife earns anything out of that property, the income is clubbed with the husband's and taxed accordingly. And this is applicable even if the gift comes from the father or mother in law. So the person who is making the gift must pay tax on the income of the person who receives the gift.
The finance minister must take a relook at this 50-year-old provision. The recommendation is to make this income tax free or taxable at the recipient's end at least, which would mean taxation at a lower rate.
4. Fourth is the need to look at the income tax exemption one gets on interest paid on housing loans. Property prices are sky rocketing as much as the interest rate is high. The income tax relief one can claim on interest paid on housing loan is up to Rs 1,50,000. For many, that is clearly not enough. The hope is the finance minister would raise this limit to Rs 2-3 lakh.
Sanjiv Chaudhury, tax partner, KPMG says, "This limit was set in 1998. Going by the inflation numbers used on capital gains, this number stands at nearly Rs 3 lakh. There is absolute justification in revising this limit at this stage. In fact, it must have been done much earlier."
5. And finally, the reimbursement allowed for medical expenses. Under current provisions, medical expenses up to Rs 15,000 is tax exempt. The limit was last revised in 2000 and there is urgent requirement to raise this limit to at least to Rs 50,000. After all, even for the simplest of medical, a simple surgery or a couple of days stay in a private hospital would cost nothing less than that.
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