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Budget: 10 things individual tax payers want from FM
June, 27th 2014

Great big hope and expectations are expected particularly by individual tax payers of India as after a long time they are expecting in the new budget some great relief. Here are some of the important suggestions which we would like the Finance Minister to consider while presenting his maiden budget specially keeping in view the expectations of the individual tax payers :-

1. All taxes except income-tax should be abolished
The individual tax payer not only makes payment of income-tax but they have also to deposit two types of education cesses. Likewise, in certain cases surcharge is also payable. The previous Government was also thinking of increasing the tax slab for persons having one crore and above income. Well the aim of the Government should be to ensure that the life is easy and simple for the individual tax payers. For this purpose, different types of taxes are required to be abolished. If the Government wants to improve the stock market, then it should also abolish Securities Transaction Tax. It is, therefore, thought that abolition of Securities Transaction Tax would mean revenue loss but the said revenue loss can be made up by bringing into the tax law simplification and rationalization so that tax payers make payment for their taxes with a smile. Even if the Dividend Distribution Tax & MAT are abolished then big boom expected in trade and industry.

2. Scrap clubbing provisions
Presently under the Income-tax Law if the husband were to make a gift to his spouse, then the income from the gifted amount will be clubbed with the income of the spouse. This has been the law ever since 1961 when the Income-tax Act was prepared. However, this provision of the law is arbitrary and without any basis. The law should also provide some minimum amount every year which the husband can pay to his wife based on a certain percentage of his income. Is it not strange to know that in case a person were to make a gift of let us say of Rs. 5 lakhs to his wife and she invests in the Bank Fixed Deposit and receives yearly interest of Rs. 50,000, then the income from Bank interest will be added to the income of the husband. However, if there would arise a divorce amongst husband and wife and the husband is required to give away 50 per cent of his assets to his wife, then as per the present law of income-tax there will not be any clubbing of income. The Finance Minister should sympathetically consider the above factor into more realistic and practical manner and should provide through the budget some portion of the amount which will not be clubbed on making the gift to the spouse. If this provision is not implemented, then tax payers would be forced to think that income-tax law is only comprising of illogical tax provision. The law should also provide for higher exemption of clubbing provisions specially for minor child because the present exemption of clubbing of the income of the minor child is only Rs. 1,500 per annum per child. This figure is exceptionally unrealistic and hence, the same is required to be substantially increased which we expect the Finance Minister to increase in this year’s budget.

3. Tax sops for salaried employees
The salaried employees in particular face big problem specially due to inflation and rise in the cost of living. In last one decade no realistic and practical proposals have been introduced in the budget which are beneficial for the salaried employees in particular. For example, even now the maximum amount of transport allowance that is exempted for the salaried employees is only Rs. 800 per month. However, if we see realistically the situation, we find that in many cases the actual amount spent on commuting from office to residence and residence to office is as higher as Rs. 200 per day. Hence, the exemption for transport allowance should be increased in a realistic manner. Likewise, the exemption under the law is provided in respect of reimbursement of medical expenses to the extent of Rs. 15,000 per annum only. In last one decade the cost of medical treatment has substantially gone up and this is also a very well know fact. Hence, the deduction in respect of reimbursement of medical expenses should be enhanced. The Children Education Allowance exempted for employees is Rs. 100 p.m. only. Likewise, the present law provides for exemption in respect of Leave Travel Concession twice in a block of four years. But the same should, however, be extended to once every year so that the salaried employees can get benefit in respect of leave availed by them. Deduction even for hotel expenses should be allowed and expenses for foreign trip should be part of eligible expenses to be allowed. The standard deduction from salary income which was available for decades is not available now. Hence, just like rental income a certain percentage should be allowed to be deducted by the salaried employees and for this purpose standard deduction should be granted. Moreover, a number of salaried employees face the problem of deduction in respect of payment of house rent allowance to the landlord who does dies not issue them rent receipt and does not provide his permanent Account Number, thus, causing problems to the salaried employees. Some solution should be thought by the FM on this front. One very important point which the Honourable Finance Minister should consider is that the tax treatment of perquisites for salaried employees should be at par for all categories of employees namely there should be same set of rules for computation of perquisites for private employees as well as for government sector employees and also for the ministers and others. It is hoped that the Government will consider this aspect very seriously because on logic and on principles of equality the same concept should be adopted for perquisite valuation without any distinction between all employees whether private sector or public sector or government sector.

4, Increase in deduction for interest on Housing Loan
For the last many number of years interest on housing loan is allowed deduction to the extent of Rs. 1,50,000. It is a well known fact that prices of the residential properties have gone up substantially in last one decade. Hence, the Government should think of increasing the deduction for interest on housing loan from Rs. 1,50,000 to minimum Rs. 2,50,000. This will help individual tax payers to buy residential houses and thereby decrease the burden of the Government in providing residential houses.

5. Increase in deduction for investment
The maximum deduction which is allowed to individual tax payers under section 80C has been limited to Rs. 1 lakh only. It has remained unaltered for the last many years. To encourage savings and investment the Government should think of increasing this deduction. The Government should also make it clear that if the limit of deduction under section 80C is increased, it will bring encouragement individual tax payers to save more for the rainy day. Now, if more savings are made by the tax payers, then surely in the years to come the Government will be less dependent on providing facilities and expenses for old age in the years to come. Hence, I would like to suggest the Finance Minister that the deduction of 80C should be increased based on the income of the tax payers. Very reasonably the limit should be up to Rs. 1 lakh deduction for persons having income up to Rs. 5 lakhs. Thereafter, the maximum deduction for 80C should be increased upto Rs. 2 lakhs where the income of the individual tax payer is over Rs. 5 lakhs and up to Rs. 10 lakhs and finally, the deduction under section 80C should be increased to Rs. 3 lakhs for all those individuals who having income in excess of Rs. 10 lakhs. Moreover, the persons having higher income would love to save more. Hence, they should be encouraged with higher deduction in terms of section 80C so that they save more money for their golden years. The deduction for medical insurance policy etc. may be enhanced with section 80C deduction so that the life is hassle free.

6. Increase in deduction for Rent Payment
Presently persons not owning a residential house property and also not getting any accommodation or house rent allowance from their employers, they are required to make payment of rent for their residential accommodation from their own pocket. However, section 80GG of the Income-tax Act provides for a deduction for rent payment equal to 25 per cent of the income subject to maximum of Rs. 2,000 per month only. The upper side of deduction was fixed by the Government long time back and hence, realistic deduction should be permissible in view of the inflation. The best option, however, will be that let Government delete the upper limit of this deduction and only restrict the deduction equal to 25 per cent of the income of the assessee.

7. Time to scrap Wealth-tax
Very few tax payers of India pay wealth-tax. It is time for the Government to consider scrapping the Wealth-tax because revenue impact is not ,much and moreover, there would be lakhs and lakhs of people who as per the present Wealth-tax Law are required to pay Wealth-tax. But the fact is that they are really not making payment of the Wealth-tax. Rather the fact remains that due to levy of Wealth-tax many tax payers are engaged into black money transactions. It is expected that with the abolition of Wealth-tax, black money transactions will be checked and the Government will be able to have better control over reducing the black money transactions.

8. Big No to Inheritance Tax
Some of the economists have suggested to the Finance Minister to levy Inheritance Tax. While this type of thinking should not at all be accepted by the Finance Ministry specially in view of the fact that once upon a time when India had the concept of payment of Estate Duty and due to Estate Duty payment there was very heavy tax evasion but once the Estate Duty was scrapped in the year 1985, we have started witnessing decline in black money transactions. Hence, the Government should not at all think of re-introducing Inheritance Tax in some form or the other. The clear cut thinking of the Government should be that the quality of the life of the tax payers should be enhanced and that the tax payers should not have much hassles and tension and problems concerning income-tax payment. If this small little care is taken, surely it is expected that people will start paying tax with a smile.

9. Rationalisation of the Provisions of Capital Gains
The Short-term Capital Gains from shares was earlier taxed at 10 per cent only. Thus, now the Government should tax the Short-term Gains at 10 per cent and not 15 per cent. Besides, there should be clarity with regard to different types of income earning activities from the Stock Market, Intra Day Transactions and income from Futures and Options. A large number of salaried employees are making payment on income-tax on Short-term Capital Gains and even it is seem that due to tax complications the individual tax payers do not declare many types of incomes from stock market. In case all the transactions from the stock market are just taxed as long – term or short – term capital gain I feel the life of the tax payer would be more easy and it is expected that the tax payers will pay higher amount of income-tax on their stock market related activities. The Income-tax Return Form should also be simplified. For example, when a salaried employee finds that with his little income from futures and options, he is frustrated as he is required to fill up very long Income-tax Return Form No. ITR4. Thus, the Tax laws should be made so simple that computing income from Stock Market etc. does not cause a big problem and wastage of time for the individual tax payers. The time limit for Long-term and Short-term Capital Gains should be the same for Real Estate Transactions as well as the Stock Market Transactions.

10. Tax Sops for Housing Sector
The provisions of capital gains specially for housing sector should be revamped to provide for special equitable tax provisions for investment in real estate sector to save capital gains with unlimited investments in residential properties to save capital gains tax and at par tax provisions for long term and short term capital gains on real estate with the capital gains in respect of stock market transactions.

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