1. Rent allowance
All those people who do not have their own house and stay in a rented accommodation, or employees who do not get accommodation or house rent allowance from their employer enjoy a special tax deduction on the rent paid by them. This deduction is allowed under section 80GG of the Income Tax Act in which an individual can avail 25 per cent deduction on the rent amount. However, the limit is restricted to Rs 2,000 per month and has not changed for many years, and is now expected to change this year.
Moreover, under the Income Tax Act 1961, there exist two dissimilar sets of tax treatments with reference to rent-free lodging provided by the employer. While a government employee only pays the license fee, non-government sector employees who get rent-free lodging from their employees are taxed at 7.5-15 per cent of the salary. There is a necessity to maintain uniformity in taxes and a new system needs to be introduced offering equal rights to employees without discrimination.
Standard exemption should continue as in the past and should be given to all employees who are salaried, while the transport allowance deduction should increase.
2. Capital gains scheme
To save capital gains, an individual can invest in capital gains bonds according to section 54EC of the Income Tax Act. The upper investment limit under this section is Rs 50 lakh. In the past, there was no such cap and all transactions related to property were done with white money. With the government making changes to this law few years ago and placing a limit, people have been resorting to unwanted ways to save tax. This cap, hence, is expected to be removed in the forthcoming Budget.
3. Rebate for senior citizens
The exemption limit for senior citizens over 80 years of age is Rs 5 lakh per annum, which when compared to other taxpayers sounds reasonable. However, in case of an income of more than the specified amount, they are required pay income tax at 20 per cent on income up to Rs 10 lakhs. Hence, the tax slabs need to be aligned to benefit super senior citizens so that they have a fair chance as compared to other taxpayers.
4. Leave travel assistance
Leave travel assistance is given to the employees by their employer on which employees avail a tax exemption twice in the span of four years. This exemption is provided under the section 10(5) of the Income Tax Act, 1961. The present rules provide that an employee can travel anywhere in the country along with their family. However, this travel exemption is not available for travelling abroad and neither for boarding and accommodation. The law needs amendment as to make employees' travel more enjoyable the exemption should not only cover travelling but lodging and boarding charges as well. Also, instead of giving this concession twice every four years, it should be given every year. Keeping in mind the kind of stress employees have to survive every day, the Budget this year should include these amendments.
5. Gift tax
According to the prevalent section 64 of the Income Tax Act of 1961, when a person gifts his wife clubbing provisions apply and the wife's income is either clubbed or combined with that of the husband. This law needs to be amended now and at least allow a reasonable amount to be given to a spouse without drawing provisions of section 64.
6. Goods and service tax
Amendments are proposed in the goods and services tax this year. According to the Finance Minister, if there is consensus among all states on the issue of GST he will announce certain amendments which will tie all loose ends on GST.
7. Financial exemption limit
The financial limit i.e. the tax limit is increased once in a while by the Finance Minister. However, it needs to be aligned according to the increasing daily expenses. If this part is taken into consideration then the exemption limit for every individual tax payer should be Rs. 2,50,000 per annum. A lower exemption limit leads to tax evasion and it has been observed earlier that tax collection increases with a reduction in the tax limit.
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