Most tax exemptions fixed in 90s, need to raise them

Albert Einstein once said, "The hardest thing in the world to understand is income tax." And it is true. Often the deductions and allowances doled out in the Budget have no logic or reason. The finance minister Arun Jaitley has a god given opportunity at this time of turmoil to set right a great inconsistency in this Budget.

The ones who are the worst hit are the salaried class. The allowances being given today does not reflect reality as they have not been revised for several years and does not take into account the galloping inflation.

Medical reimbursement of up to Rs 15,000 per annum has been permitted as a deduction from 1998-99. While at that time it may have been reasonable, given the cost of medicines today and doctor's charges, this should be atleast Rs 50,000 or actuals.

Transport allowance of Rs 800 per month was increased last year to Rs 1600. Even this is very little and considering inflation should be atleast Rs 3,000.

Children's education allowance was set in 1997-98 at Rs 100 per child and hostel allowance at Rs 300. Education is important and good education today is very expensive. This allowance has to be realistic and city/ school specific.

Leave travel allowance is allowable twice in a block of four years. This defies logic. Is the submission being made that one should holiday only once in two years. Considering the pressures of work today, I believe one needs a break more than once every year. The amount is allowable only for travel within India. It is often cheaper to travel abroad on a holiday than travel within India and that option should be given to the salaried employee.

Interest on housing loans upto Rs 2 lakh is allowed as a deduction provided the construction is completed within three years. If not the deduction is restricted to Rs 30,000. Considering that builders are often delaying the completion and the handing over of houses, this restriction should be removed. Furthermore, considering that small apartments in distant suburbs are costing nearly Rs 1 crore, the deduction should at least be Rs. 10 lakh.

Investment in Public Provident Fund, equity linked savings schemes (ELSS), life insurance, repayment of housing loan and the likes is allowed a deduction of Rs 150,000. As savings and investments boost the economy and are to be encouraged this deduction (especially investments in ELSS) should be increased to at least Rs 500,000.

The exemption for rent paid, if an employee does not receive house rent allowance was fixed in 1996-97 at Rs 2,000. Rented accommodation for a family at Rs 2,000 per month does not exist. This must be raised to at least Rs 10,000 per month.

The personal tax exemption at Rs 250,000 is very little. At the very least considering inflation and reality, this should be increased to Rs 500,000.

The Budget should aim at bringing others within the tax net.

Apart from the common man, there must be focus on the economy especially building the infrastructure. The recent 'Make in India' campaign was long overdue. These must now be implemented and to do that, there must be speedy approvals. On a recent trip to Aurangabad to view the glorious Ajanta and Ellora caves, I was told that the Japanese Government had agreed to build a six lane highway from Aurangabad to the Ajanta Caves. It was abandoned by them in frustration after several years because no approvals were forthcoming.

I was also disappointed that at the Ajanta and Ellora Caves though world heritage sights, there was a lack of facilities. There were no hotels. The roads leading to the caves could have been much better. There were very few tourists. I felt ashamed that we rave about foreign sites which are mediocre compared to ours. The Alhambra in Spain attracts over seven million tourists every year but it is not as impressive as Fatehpur Sikri which attracts only around 600,000. There is no point in saying incredible India if we do not do anything about it. As the government may not be able to develop these sites, my suggestion would be to allow companies to adopt these sites and develop them. Let them charge too for the upkeep. There is no reason why, in a few years, we cannot get more tourists than the whole of Asia combined.

The Budget should focus on developing the economy as opposed to playing to vote banks. Public sector banks, already reeling under huge losses, should not be forced to give loans that will never be repaid. The emphasis for a change must be on growth and economic sense not on appeasement.

The writer is MD, Cortlandt Rand, and an author