In spite of the fact that year after year the Government is trying to simplify and rationalize the Income-tax Law but still there are innumerable provisions in the Income-tax Act which make them appear silly by a large number of tax paying public of India. In this small article an attempt is being made to list down some of these common tax provisions which may be amended in the forthcoming Finance Bill so that a large number of tax paying public of India can get some relief. It is expected that the Hon'ble Finance Minister will surely take care to address these provisions with an open mind specially when the Direct Taxes Code is not expected to be implemented from 1-4-2012. Here are these silly tax provisions as commonly complained by the tax payers.
1. A husband cannot give a gift to his wife otherwise as per the provisions contained in section 64 of the Income-tax Act clubbing provisions would apply and the income of the wife will be clubbed or added with the income of the husband. Is it not unrealistic tax provision? The law should be amended at least now through the Finance Bill to permit some reasonable amount which can be given to the spouse without attracting provisions of section 64.
2. Presently as per rule-3 of the Income-tax Rules, 1962 there exists a complete different set of tax treatment specially with reference to rent free accommodation provided by the employer. While the Government employees pay licence fee and are out from the tax net but the non- Government sector employees they receive rent free accommodation on which they are taxed exorbitantly namely 7.5 % or 15% of the salary depending on the population of the town. It is high time that just like race discrimination the concept of employee discrimination should cease to exist in the Income-tax Law. Uniform system of taxing Salary & Perquisites should be introduced and the provisions to this effect should find place right now in the Finance Bill.
3. For all types of tax payers who do not have a house of their own or for the employees if they do not get a accommodation from the employer and they also do not get house rent allowance then they can all enjoy a special tax deduction in respect of the rent paid by them for the house. The deduction is permissible in terms of section 80GG of the Income-tax Act whereby one can enjoy deduction for rent paid upto 25% of the income. This really sounds very good and interesting and brings cheers to the tax payers but the limit is restricted to deduction of maximum Rs.2,000/- per month. The limit remains so for the last so many years hence requires to be changed at least now.
4. Standard deduction as in the past should be permissible to all salaried employees.
5. To save capital gain as per the provisions existing in the Income-tax Law a person can invest in capital gain bonds. As per the provisions of the law contained in section 54EC of the Income-tax law, there is a upper cap of investment under the Income-tax Law which presently is Rs. 50 lakhs. In the past there never was any cap in investment which resulted into property transactions taking place mainly with white money. But couple of years ago the Government by amending the provisions of the law has put cap of just Rs. 50 lakhs for investment in these capital gain bonds. Putting this cap legally is not valid in the eyes of the law. Hence, the cap should be deleted.
6. The exemption limit for senior citizens is Rs.2,50,000 per annum. This is pretty very good in comparison with a normal individual tax payer. However, the poor senior citizen as soon as the income exceeds Rs.2,50,000 per annum is required to make payment of income-tax @ 10% on income upto Rs.5 lakhs. Hence, the slabs of income-tax should be realigned in all fairness for providing benefit to the senior citizens in comparison with other tax payers.
7. The Finance Minister generally increases the exemption limit once in a while. The question that remains to be answered in a realistic manner is why should not the Income-tax initial exemption limit be realigned in tune with the day to day minimum expenditure of a person earning the income. If this aspect is taken into account then surely the minimum exemption limit in all fairness for individual tax payers should be Rs.2 lakhs per annum. It is these unrealistic exemption limits which are responsible for tax evasion in the country. If the Finance Minister were to consider the realistic situation and also realign the tax rates then obviously the tax evasion in the country could be a thing of the past. The fact remains on record that whenever the tax rates in the past have been reduced the tax collection has always been higher. The maximum Tax rate should be 25% only so that tax evasion will reduce.
8. Leave Travel Assistance granted to employees by the employer enjoy tax exemption twice in a block of 4 years. However, the present rules provide for travel in any part of India to the employee so also the members of the family. This deduction is granted as per section 10(5) of the Income-tax Act, 1961. Unfortunately, the exemption is not available for travel concession granted to employees for travel outside India. The Income-tax Law should be amended so as to provide the exemption of travel concession even outside India. Moreover, as per the present law what is exempted is only the value of travel concession and not boarding and lodging. To make the travel as a real recreational activity for the employee, the deduction of section 10 (5) should not only cover the value of travel concession but also should cover the expenses on boarding and lodging. Likewise, this deduction should be tax exempted for the employees each year, specially keeping in view the great stress under which the employees work these days, hence let the Finance Bill make necessary amendment to this effect.
9. Presently the salaried employees enjoy tax exemption in respect of medical expenses upto Rs.15,000 per annum. This limit should be enhanced to at least 30,000 rupees per annum in view of increase in the medical expenditure in last 3 years. Besides, the income-tax exemption is also granted in respect of medical expenses incurred on the employee for treatment abroad but this deduction is available only when the gross income of the employee is maximum upto Rs.2 lakhs per annum. Well, this restriction on income for availing tax concession on medical expenses abroad should be done away with. It is a fact that in majority of the cases the expenses on travel for medical purposes of the employees are sanctioned only in respect of senior employees. Hardly one could find any company in India where the expenditure on foreign treatment is incurred for employees having salary below Rs.2 lakhs per annum. Hence, this provision must go. 10. In terms of section 80C of the Income-tax Law presently within the overall limit of Rs.1 lakh deduction is granted to the tax payers in respect of tuition fee paid by them. However, this deduction is only for the tuition fee. It does not cover expenses which are directly related to the education of the child like the expenses for purchase of books, payment of school bus, payment of hostel facility and other connected expenses for the education of the children. The Hon'ble Finance Minister should permit all legitimate expenses to be deducted u/s 80C towards education of the children which will produce a bright India in years to come.
11. The loss of business is not allowed as a deduction to be set off from sa;ary income in the case of a salaried employee. There seems to be no logic in it. Hence, the provisions should be amended so that even the employees as well as the Directors of the companies can enjoy the tax adjustment of business loss with salary income. 12. To make the life more simple and to ensure that the tax provisions are easy to remember and finally even on the principles of equity, uniformity and justice, it is recommended that the period of holding a capital asset to make it long-term capital gain should be 365 days for all categories of assets whether shares or real estate or mutual funds and also for the non-listed company shares.
13. Presently an individual tax payer to save his capital gain can invest in a residential property by taking advantage of section 54 or section 54F of the Income-tax Act, 1961. However, this benefit is available only for investment in one residential house why should not the law be amended to grant permission to the tax payer to invest the capital gain amount in any number of residential houses.This amendment alone can help in a big way for removing the housing shortage in the country.
The Finance Bill, 2012 is to be presented in the Parliament and as this time the FM can surely incorporate the above mentioned points in the Finance Bill.