Increase in savings exemption limit u/s 80C of the Income-Tax Act, 1961 (Act)
With a constant decline in the percentage of individual savings, it’s expected that there would be an increase in the exemption limit available under section 80C to Rs3 lakh from the current limit of Rs1 lakh, to boost savings. This can be done by introducing a separate limit of Rs2 lakh for specified long-term investments such as life insurance and annuity, investments in Rajiv Gandhi Equity Savings Scheme and employee contribution to New Pension Scheme, within the ambit of section 80C.
Increase in exemption limit -
a) Children Education Allowance:
The exemption limit for Children Education Allowance may be raised from Rs100 per month per child to Rs1,000 per month per child for maximum two children or actual expenses incurred, whichever is less. The revision is warranted to counter increased cost of education.
b) Transport Allowance:
The transport allowance to the employee to meet his expenditure for commuting between his residence and the place of his duty is currently exempt up to Rs800 per month. Given rising commuting costs, it’s expected that this limit may be raised to at least `3,000 per month.
Reimbursement of Medical Expenditure
The existing exemption limit towards medical expenses is `15,000 per annum and considering that cost of healthcare has increased substantially, there is a strong case for increasing the limit of exemption of medical expenses for employee and his family to at least Rs50,000 per annum.
Leave Travel Concession (LTC)
Currently, under the Act, assistance or concession received from employer for employee and his family on leave to any place in India is exempt (2 journeys in a block of 4 years). However, this exemption is allowed only for travel within India. Considering that a number of Indians travel abroad, it is expected that the scope of LTC would be extended to cover travel outside India.
Increase in limit on interest in housing loan
At present, a deduction of up to `1.5 lakh is available from taxable income towards interest on loan taken for acquiring house property for self-occupation. The prime lending rate existing when the limit was fixed was in the range of 6-7% and considering the present rate hovering between 10-11%, the limit should be increased to Rs5 lakh.
Elimination of taxing the contributions towards superannuation fund as a perquisite
As per the current provisions, if an employer is contributing more than Rs1 lakh to an approved superannuation fund for his employee, the amount in excess of Rs1 lakh is being taxed twice in the hands of the employee, once as a perquisite in the year of contribution and again at the time of receipt of annuity. The Budget should not tax excess above `1 lakh as a perquisite in the year of contribution.
ESOP taxation
Currently, ESOPs are taxed as a perquisite on the notional benefit on the date of exercise and then as capital assets on the actual capital gains arising on the date of sale. This Budget may propose that ESOPs should not be subject to tax on notional perquisite value and taxed only on capital gains arising from the actual sale of shares.
Abolition of wealth tax
The amount of revenue collected on account of wealth tax is very meagre currently. Therefore, it appears that there is a case for discontinuing with this tax, especially when one considers the time and energy costs incurred in the areas of assessments and appeals as well as the large number of litigations involved.
The writer is director, tax and regulatory services, Ernst & Young. Views expressed are personal
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}
)
){kind=small}
){kind=small}
)
)
)
)
)
){kind=small}
){kind=small}
){kind=small}
){kind=small}
){kind=small}