Come Budget time - the individual tax payer expects increased exemption limit and permissible deductions. While the slab rates applicable to individuals have undergone minor changes during the past few years, there is always optimism in this regard. The earlier Budget 2014 presented by the Finance Minister in July 2014 increased the basic exemption limit by Rs. 50,000 to Rs. 250,000. The individual tax payer expects a further increase in the exemption limit to at least Rs. 500,000 taking into account present cost of living and inflation.
The Income Tax Act provides for deduction in relation to certain investments and payments from the gross taxable income. While Section 80C provides for a long list of items for which deduction can be claimed, the maximum limit for the deduction was only Rs. 100,000 before it was increased to Rs. 150,000 in the Budget 2014.
To promote increased savings amongst individual tax payers and considering the actual expenditure incurred on items like tuition fees, a further increase in the amount of deduction to reflect real amount of investments/ expenditure would be a welcome step.
While salaried individuals are allowed deduction in relation to various allowances such as conveyance allowance and children education allowance, the amount of deductions allowed are very low. For example, Rs. 800 per month for conveyance allowance and Rs. 100 per month per child as education allowance up to two children. These latest amendments to the limits for conveyance and children education allowance were made in 1998, with effect from August 1997. Increase in the limits to reflect actual expenditure that may be incurred for these purposes is long awaited. Without any increase in the limits, these deductions currently have very little practical value.
Chartered accountant in New Delhi
