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Budget 2013: Expectations on Personal Taxes

Published on Tue, Feb 19,2013 | 17:32, Updated at Tue, Feb 19 at 19:54Source : 

By Shuddhasattwa Ghosh, Director, Tax and Regulatory Services, PwC

It's that time of the year again when all eyes will be on the Finance Minister and expectations run high. The Budget proposals will be the most talked topic in the weeks to come. The FM will have a tough task of balancing the expectations of everyone on one hand and boosting the economic growth on the other.

In the age when prices are constantly rising, the common man is struggling to balance the income and expenses. As in every other year, the common man expects tax sops to have more disposable income in hand. Their expectation from FM would be – lower taxes/more tax reliefs, enhanced limits for tax savings and simplified tax laws/process.

On this back ground, lets crystal gaze what could come for the common man on the D day.

Lower taxes/more tax reliefs:

•Since the tax rates were aligned last year with the proposed rates as per the draft Direct Tax Code (DTC), it is unlikely that the FM will introduce any changes in the current slab rates. An internal thought process is to tax the “super rich”. It would be more practical to levy this charge expenditure / spending based (like Fringe Benefit Taxes, which was levied a few years back).

•Across industries, employees are looking at having the standard deduction reinstated to provide some relief to salaried employees.

•With the rising expenditure on health care in recent times, there is a definite need to enhance the exemption limit for medical reimbursement which has been a paltry Rs. 15,000 per annum from the past many years. Increasing the exemption limit to Rs.50,000 may bring some cheer on this front.

•Similarly, other exemptions like conveyance exemption (Rs. 800 per month), children education allowance (Rs. 100 per month per child), children hostel allowance (Rs. 300 month per child) and income of minor child (Rs. 1,500 per child) which have remained constant over the years need to be enhanced to match with the market realities.

Enhancing the limit for tax savings:

The Budget should have some proposals to encourage savings/promote investments like:

•Enhancing the limit of Rs. 1 lakh under Section 80C (deduction for various investments like Provident Fund, PPF, LIC etc) has been long overdue.

•Currently, the deduction for employee contribution to the National Pension Scheme (NPS) is included within the overall limit of Rs. 1 lakh available under Section 80 C.  Providing a separate deduction for employee’s contribution to NPS over and above the 80C limit would be encouraging ( bringing in line to the employer’s contribution at maximum of 10% of salary)

•The deduction for interest on housing loan which currently stands at Rs. 1.5 lakhs (for self occupied property) needs to be increased to keep up with the times.

Simplified tax laws/process

•It would be good if the Government could relax the  mandatory submission of the Tax Residency Certificate (TRC) for Non-resident individuals from 2012-13 to claim any foreign tax relief. There are practical challenges like the feasibility of obtaining a TRC with the prescribed particulars from the different countries, difference in tax years etc which need to be addressed.

•Currently under e-filing, the tax return is uploaded electronically upon which an ITR V is generated, duly signed copy of which needs to be mailed to the Centralised Processing Centre (CPC), Bangalore within 120 days from the date of e-filing. Since the ITR Vs from all over the country are being received in one centre, there are delays in acknowledging the receipt or the ITR V is lost in transit. The Government could think of simplifying this process or extend the limit of 120 days or alternatively, do away with the paper filing of the acknowledgement.

We would need to wait and watch to see how much of these are effected to have a cheerful common man post budget.


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