Budget 2017 - Expectations of the Salaried Class
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
