The formation of the new government has raised the hopes and expectations of the common man. Right from relaxation in price hikes to better facilities, the governments is now expected to perform on a lot of areas now. With only a few days left for the announcement of the Union Budget 2014, here are some changes we expect in this year's Budget that would benefit you as a taxpayer.
Increase in the Section 80C limit: To encourage more household savings we expect the current Sections 80C, 80CC and 80 CCC investment limit of Rs 1,00,000 to be reset to at least Rs 2,00,000. The exemptions under these sections include life insurance premium, investments in public provident fund, employees provident fund, national savings certificates, repayment of home loans, equity linked saving schemes sold by mutual funds and fixed deposits (FDs) of five year maturity with banks. This would also make investments in Annuity Insurance policy plans a better investment and secure your income post retirement.
Higher deduction under Section 80TTA: Having cash in hand is always important. But not a lot of us prefer keeping money held in a savings account simply because the interest rate is low. But, in retrospect, if the current deduction of Rs 10,000 in respect of interest on savings accounts with banks is increased to Rs 20,000, it would encourage small savings.
On the housing loan and property front: The deduction for interest on housing loans needs to be increased from the current limit of Rs 1,50,000 considering the rates for residential properties have shot up significantly over the past few years. To provide relief to the tax payer, this limit should be increased to at least Rs 3 lakh.
Currently, for those purchasing a new residential property (even after sale of a previously existing property) the time allowed for purchasing a new house property and for investing the capital gains from sale proceeds is currently 2 years from the date of sale. This basically means you can put aside your proceeds into a Capital Gains Account Scheme to avoid long term capital gains tax for up to 2 years or till the time you invest in a new residential property. This time limit for completion of the house could be increased to at least 5 years considering the number of new developers and the increased time taken for completing projects.
In addition, the amount one can invest in Section 54EC bonds should be increased from the current 50 lakh to 70 lakh in a financial year or within 6 months considering year on year increase in ready reckoner rates and hence stamp duty on purchase.
Exemption for children under Section 10: Education in India is growing at a phenomenal rate, but is still in significant need of attention, support and backing. Education allowance is exempt up to Rs 100 per month per child for a maximum of 2 children. This should see a change of up to a minimum of Rs 700. Hostel allowance exemption could see an increase to Rs 500 from the current Rs 300 per month per child for a maximum of 2 children.
Additionally, income of minors in the hands of parents/guardians is exempt to the extent of Rs 1500 for each minor. To meet the high cost of living and expenses on children the ICAI has suggested an increase in this amount to Rs 10,000.
Some of the other points we would like the budget to address would be rationalizing limits for tax free allowances such as education allowance, transport allowance and medical allowance. In case of medical insurance, the deduction for the premium should be raised to support higher coverage and thereby increase affordability of inflated costs of medical care.
Increase in the limit of medical reimbursements: Medical reimbursements in a salaried employee's CTC are currently exempt up to a maximum of Rs 15,000. With the steep increase in the cost of medicines and routine medical check-ups, expectations are positive for the limit to be increased to Rs 25,000 under Section 17 of the Income Tax Act.
Tax exemptions post retirement age: Our working lives are filled with worries and ups & downs of various magnitudes. This should definitely end during your post-retirement years! In relation to this, there could be chances of an increase in the tax exemption threshold for senior citizens (60 years or more but below the age of 80 years) from Rs 2,50,000 to Rs 3,50,000 and for very senior citizens (80 years or more) from Rs 5 lakh to Rs 6 lakh.
The Union Budget for 2014-2015 and the change in government have set high expectations for every individual Indian. But in a country that requires betterment from angles such as education, medical facilities, housing /hostel facilities for the less privileged, infrastructure for industrial development and agriculture, it is only just that we take the onus on ourselves as responsible Indian citizens and pay our taxes on time apart from saving correctly in schemes allotted by the government so that our money can be grown and used for a better stronger India!