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Budget 2016. Mr Arun Jaitley. please make our tax benefits inflation proof


Salaried employees often justifiably claim to be the taxman's milch cow. Unlike businessmen and professionals who are able to claim tax exemption on several expenses, salaried employees have to pay a huge sum as taxes that are deducted at source by the employer.

An employee can only get the benefits of some tax exempt allowances. However, most of the exemption limits have not been revised for years, eroding the real tax benefit.

For a few allowances exemption limit has been revised upwards recently, but even that did not fully take into account the rate of inflation. For example, an exemption of transport allowance of Rs 800 per month existed from the financial year 1997-98. The last budget doubled it to Rs 1,600 per month. Given the change in the inflation index, this figure ought to have been revised to at least Rs 2,600.

Every year, Rs 1.5 lakh is allowed for deduction under section 80C (available for a wide range of investments such as PPF, NSC or repayment of housing loan). It was last revised for FY 2014-15 from Rs 1 lakh that existed since 2005-06. If inflation was taken into account, the revised cap should have been Rs 2.17 lakh. Many other tax exemption limits haven't seen any revisions for years (see chart).

The Standing Committee, which had examined the now defunct direct tax code (DTC), had recommended revisions in some cases, such as a hike in exemption limit for medical reimbursement from the current Rs 15,000 to Rs 50,000. However, it had also suggested abolishing of Leave Travel Allowance (LTA).

There are other conditions in our tax laws that also aren't fair to the taxpayer. For instance, LTA for you and your family is tax exempt (limited to the economy class airfare for the shortest route available to your destination). However, you can avail of LTA benefit only twice in a block of four calendar years, for travel within India. The exemption should be available for annual travel.

Interest of up to Rs 2 lakh per year on housing loans is allowed as a deduction from 'income from house property' - but with a catch. Construction must be completed in three years, else the interest deduction is limited to Rs 30,000 only. As this newspaper has written in the past, most housing projects are getting delayed beyond three years and for no fault of taxpayers, their tax benefits are getting reduced drastically.

Source Link : economictimes.indiatimes.com
Date : 18-02-2016 01:39:41