There are several deductions and benefits available to individuals under the Income Tax Act. However, one major point that has been witnessed with respect to many of these is that the value of the actual amount available as a deduction has actually eroded quite significantly in recent times; courtesy inflation. Arnav Pandya examines a few of these benefits that have suffered big losses in value in real terms, especially when compared to the actual intent of its presence.
Medical expenses A sum of Rs 15,000 received as medical reimbursement from the employer is not added to the income of the employee, so this is a receipt that provides some benefit or relief for the employed. But the limit has remained Rs 15,000 since long. With average rate of consumer inflation of 8.5 percent per annum faced in the the last six years, the current value of the benefit actually stands at around Rs 9,200 due to the rise in inflation.
Interest deduction on housing loan There is a deduction for interest paid on housing loan for the purpose of purchase or construction of a house. The benefit here for a self occupied property is at Rs 1.5 lakh per annum. Due to inflation, the value of rupee has eroded and at the same time property prices in the last several years have risen sharply. If the benefit had to keep pace with inflation faced by individuals, then the deduction should be actually Rs 2.45 lakh based on the consumer inflation witnessed in just six years.
Deduction for investments There is a benefit of deduction of Rs 1 lakh for specified investments made during the year under Section 80C. The real benefit of this figure too has eroded over the last many years as inflation has continued unabated and would have eroded nearly 40 per cent to around Rs 60,000 if the inflation effect of the last 6 years is considered into the calculations.
Expenses for medical treatment The cost of medical treatment has risen sharply over the last several years even beating the normal rate of inflation prevalent in the economy. There is a deduction available to an individual if there is expense made on the medical treatment of specified diseases like cancer, neurological diseases etc. The deduction here is Rs 40,000; and this too when factored in for the inflation effect over the past 6 years, would actually be worth around Rs 24,000.
Standard deduction for family pension There is a standard deduction of one third of the amount earned or Rs 15,000 whichever is higher present on family pension received by a person. This is the pension received by the family of an employee from the employer once the employee is no more. The amount here once again provides very little benefit because inflation once again eats away at the real figure that is available.