With the Union Budget 2017 just a couple of weeks away, there are expectations that the government will take some measures to help the common man, especially the salaried class, who has rallied behind the government’s decision on demonetization despite suffering a lot post the note ban.

Experts are also of the view that the upcoming Budget 2017 should provide some tax gain for the common people to soothe at least the cash ban pain.

Otherwise also, “there are only a few tax concessions available to individual tax payers. Most of the current set of tax benefits like medical reimbursement, conveyance allowance etc., at the present level, do not offer any real economic benefit to the individual tax payers.

Instead they only add to the administrative burden for the employers as claims made by the employees have to be reviewed and processed by them,” says Vikas Vasal, National Leader-Tax, Grant Thornton India LLP.

Thus, either these tax benefits should be substantially increased or they should be done away with and instead a special tax benefit like the erstwhile standard deduction be introduced. “This would simplify the tax law, reduce administrative burden and curtail unnecessary litigation associated with these tax concessions,” suggests Vasal.

In view of the above, here’s what to expect from the Budget 2017 for the salaried class:

1. Tax slab rates should be revised upwards

It is widely expected that there may be some upward revision in the income tax slabs to provide some relief to the common tax payers. What is making people more optimistic is the recent hint from Finance Minister Arun Jaitley himself that income tax slabs could further be increased, lowering the tax burden on taxpayers due to higher revenue being collected on account of cashless systems.

Some people are even expecting that the government should increase the current income tax exemption limit from Rs 2.5 lakh to Rs 4 lakh. However, the common expectation is that the exemption limit be raised from the current Rs 2.50 lakh per annum to Rs 3 lakh, while the subsequent slabs of 10 per cent, 20 per cent and 30 per cent should be applicable to annual income range of above Rs 3 lakh and up to Rs 10 lakh, above Rs 10 lakh and up to Rs 20 lakh and above Rs 20 lakh, respectively. If implemented, this will help alleviate the common man’s sufferings to some extent.

2. Reduction in tax rates

Salaried individuals are always at a loss when it comes to tax rates since they end up paying high amount of taxes when they fall into high salary brackets. Currently anyone who earns more than Rs. 10 lakh per annum pays 30% tax on the amount exceeding Rs. 10 lakh. Thus, he has to forgo a large portion of his income in taxes. Hence, apart from revision in tax slabs, change in tax rates would always be a welcome move.

“The IDS scheme of the government launched last year is expected to add a lot of tax revenues to the government coffers with almost Rs. 75,000 crore declared as black money. Considering a tax rate of 45%, almost Rs. 35,000 will be collected as taxes. These revenues are expected to help the government reduce the tax rates in the coming FY,” informs Vaibhav Sankla, Director, H&R Block India.

3. Higher deduction for interest paid on housing loan

Housing and the real estate sector are facing a lot of hardship. The recent media reports indicate that sales have declined substantially and the sentiment is quite low. It is a fact that the real estate sector is one of the key growth engines for a developing economy like India.

It provides large-scale employment to unskilled and semi-skilled workers in the country, which is a need of the hour, to boost employment opportunities for a large scale population. This sector also impacts a few of the critical sectors like cement, steel, logistics etc., which in turn are important for the overall growth of the GDP.

Also, “keeping in view the government’s agenda of providing housing for all, it is imperative that some tax concessions are provided in the Budget. One such option could be to increase the tax deduction for interest paid on housing loan from Rs 2 lakh to Rs 3 lakh. This will also provide an immediate boost to the banking services sector, which is flush with funds post demonetization and looking at avenues to lend money to the masses,” says Vasal.

Some tax experts also believe that people having a single home need to be allowed to deduct the entire amount paid as interest on home loan. Vaibhav Sankla, for instance, says that currently the home loan interest deduction is capped at Rs. 2 lakh per annum for self-occupied house property and deduction of actual interest paid is allowed for a second home that is given on rent or is deemed rented.

However, “nowadays buying a second home is not very common owing to high property prices. In such cases, home owners possessing a single home need to be allowed to deduct the entire amount paid as interest on home loan. This would be a welcome relief for salaried individuals since they do not have much scope for tax saving and moreover this is an expense-based deduction,” says Sankla.

4. Increase in deduction for insurance premium

The deduction under 80D is currently capped at Rs. 25,000 for self, spouse and dependent children. An additional deduction of Rs. 25,000 is available for parents and Rs. 30,000 if they are senior citizen parents. Hence the total deduction available under this section can go up to Rs. 55,000. A deduction for preventive medical expenses is also available up to Rs. 5,000 spent as a part of the overall deduction.

A deduction for the actual expenses made in this regard on medical insurance premiums will be a welcome move since insurance premiums are very high, especially when it comes to parents. The cap of Rs. 5,000 on preventive health check-up expenses should also be removed in budget 2017. It will help salaried individuals to save huge amounts in taxes.

5. Increase in deduction for education and childcare expenses

Childcare nowadays has become very expensive for parents, especially for those staying in metro cities. The maximum deduction for tuition fees permitted under Section 80C is Rs 1.5 lakh per financial year, with deductions eligible only for two children per assessee. Tuition fees generally constitute a very small portion of the entire education fees for the year. This deduction should be extended to other portions of the fees as well.

“Childcare in big cities also calls for daycare expenses, especially for working parents. The expenses many a time run into more than Rs 1-2 lakh per annum. These expenses should also form a part of deductions under Section 80C. This will provide another expense-based deduction to individuals and be a great move towards providing a deduction aimed at working parents,” says Sankla.

6. Deduction for rent paid where no HRA is paid by the organization

Generally, organisations pay HRA to employees in order to ease the burden of rent and there is an exemption available under the tax laws on HRA. However, there are instances when organisations do not include HRA in the salary components.

When HRA is not paid by the organization, salaried individuals are being allowed a deduction of Rs. 5,000 per month under Section 80GG from FY2016-17. This deduction should be increased to at least Rs. 10,000 for metro cities. This is because rent for a decent accommodation in metro cities has risen to this level and there is a need to increase the deduction so that salaried individuals get the benefit of this deduction.

7. Standard Deduction

There are many deductions/ exemptions like medical reimbursement, conveyable allowance, meal allowances etc. Employees actually incur much more cost and obtain very little tax benefit. To highlight, a family of four members will incur on an average, say, Rs 50,000 plus on general medical ailments. And if the family has senior/ailing households, then this expenditure for general hospital/doctor visits and medicines may be much higher.

Therefore, there is need to take a re-look at all such benefits and increase them substantially in line with the current economic reality. Same is the case with other tax benefits like travel allowance etc. Keeping this in view, there is need for a special tax benefit like the erstwhile standard deduction to be introduced the budget 2017.

Source: FE

The post Budget 2017 – Expectations of the Salaried Class appeared first on CENTRAL GOVERNMENT EMPLOYEES NEWS.

Budget 2015 may be yet another one, but financial comfort and rising hopes on growing Indian Economy, may provide room for the finance minister Mr. Arun Jaitley to announce more exemptions or reliefs in the income tax front in this Budget. More than additional exemptions these measures can be called as updating of Income Tax Exemption limit for various allowances which were fixed very long ago which unrealistic to present date.

Budget 2015 Wish List of Salaried Employees on Income Tax :

Basic Income Tax Exemption Limit :

Increase of Basic Income Tax Exemption Limit to Rs. 3 lakhs to meet out inflationary Trend.

Transport Allowance:

Transport Allowance is exempted to an extent of Rs. 800 per month. However, the lowest amount of Transport Allowance of Rs. 400 (plus dearness allowance) received by the employees in the Group C and MTS cadres itself is taxable. So there is a very high need for increasing exemption limit for Transport Allowance payable Government Employees.

Children Education Allowance:

Children Education Allowance is the other allowance, which is exempted to an extent of Rs. 100 per month. Of course this exemption limit was decided more than a decade ago when tuition fees of Rs. 100 was reimbursed to Central Government Employees. On implementation of sixth Pay commission recommendations, Children Education Allowance has been raised to Rs. 1000 and incremented when DA crosses 50% each time. So, there is no point in keeping the slab on IT Exemption for CEA at this low level. It is widely expected that Childen Education Allowance is to be fully exempted from Income Tax.

Medical Reimbursement by Employer:

The present Exemption Limit of Rs.15,000 as far as medical reimbursement is concerned provided by an employer needs to revised to Rs. 50,000 considering the cost of medical treatment presently.

Health Insurance premium under Section 80 D:

Salaried Employees also expect an increase of exemption limit for Health Insurance Premium paid to Rs. 50, 000 from the current level of Rs. 35,000 (Rs. 15,000 for family and Rs. 20,000 to Parents)

Re-Introduction of Standard Deduction:

As of now, Salaried Employees are treated at part with Tax Payers who are self employed and doing business of their own, as far as Income Tax is concerned. But this was not the case 10 years ago (until 2004-05). Just like Self Employed and Business related tax payers enjoy deduction of expenses made from the income, a fixed amount was exempted from total income of Salaried Employees which was termed as Standard Deduction. One of the expectations of Salaried Employees now is re-introduction of Standard Deduction for their income tax assessment.

Exemption Limit of Rs. 1.5 lakh for Savings under Section 80 C:

Also, Salaried Employees feel that Exemption of Rs. 1.5 lakh available for Savings and Insurance Insruments as wells as retirement plans is too low considering the number of investments allowed to be exempted under this category. It is expected that this Exemption limit has to be increased to Rs. 2 lakh at least.

Exemption limit on Rent Paid when no HRA is received :

Further, Rent paid by an individual is exempted now to an extent of Rs. 2000 per month if no House Rent Allowance is received. This limit was fixed in the year 1998. Needless to say house rent cost has increased enormously since 1998. So, this exemption limit needs immediate revision to match the current rental cost.

Source: moneycontrol.com

The post Budget 2015 India: Wish List of Salaried Employees on Income Tax appeared first on CENTRAL GOVERNMENT EMPLOYEES NEWS.