Budget 2018-19 Expectations

1. Budget2018-19Expectations 10 Recommendations for the cbdt in respect of personal taxation matters

2. Budget Expectation # 1 • Salaried persons are allowed to claim tax exemptions for the Leave Travel Allowance received by them from their employer if they go on vacation anywhere within India. This exemption is still allowed only for vacations within India. • The travelling cost to visit some overseas destinations is cheaper than visiting tourist destinations in India. Therefore, it is recommended that the exemption should be allowed for both Indian destinations and foreign travel.

3. Budget Expectation # 2 • Currently, an employee can claim deduction up to Rs. 15,000 for reimbursement of medical expenses obtained from the employer. This limit of Rs. 15,000 was introduced way back in the year 1999. • In the last 18 years, cost of medical treatment has increased manifold but exemption limit has never been revised. It is recommended that the exemption limit on medical expenses should be raised to at least Rs. 50,000 per annum.

4. Budget Expectation # 3 • Section 80C allows deduction of up to Rs.1,50,000 in respect of payment for life insurance policies, repayment of housing loan, PPF, children’s education expenses, so on and so forth. • The threshold limit under this section in only Rs.1,50,000 which generally gets exhausted and very little money is left for investment in other schemes. • Therefore, it is recommended that maximum deduction under Section 80C should be increased to Rs.2,50,000.

5. Budget Expectation # 4 • The amount invested in FD with a maturity of 5 years or more qualifies for deduction under Section 80C. Interest received on such FDs is charged to tax in the hands of the investor. • Since many banks have substantially reduced the rates of interest on FDs, the net return on investment after taxes is inadequate. • Therefore, interest accruing on FDs up to reasonable threshold limit should be exempted from income-tax.

6. Budget Expectation # 5 • From the last four years, basic exemption limit has remained same, i.e. Rs. 2.50 Lakhs. • This year Government should increase the threshold limit.

7. Budget Expectation # 6 • Employees switching jobs are often required to pay sum amount to the employer for not serving the entire notice period. It is a double whammy for the employees as they are required to pay the money to the employer & they are also not allowed to claim the deduction for such payment. • In a recent case of NandinhoRebello v. DCIT [2017] 80 taxmann.com 297 (Ahmedabad – Trib.), the Tribunal held that tax shall be levied only on actual salary received by an employee. • Therefore, it is recommended that Section 16 must be amended suitably to allow deduction of notice pay.

8. Budget Expectation # 7 • Section 54 and 54F of Income Tax Act provides very little time to the taxpayers to invest in a new house. It allows up to 2 years to purchase a property and 3 years to construct it. Generally, for big project or township, the developers take minimum 5 years before handling over the possession of the property to the buyers. • In that case, if a buyer gets the possession of new house after 3 years, he is not allowed to claim Sec. 54/54F exemption. • Therefore, suitable amendment is needed to allow section 54/54F exemptions to genuine taxpayers who invest in a project developed by a builder registered under RERA.

9. Budget Expectation # 8 • Till financial year 2004-05, an additional deduction, i.e. standard deduction, was available explicitly against salary income. It was withdrawn from assessment year 2006-07. • There are various expenses that an employee incurs during the course of his employment for which no deduction is available to him. As per return filing statistics, maximum number of returns have been filed in Form ITR 1, which is generally used by salaried persons and pensioners to file their annual return of income.

10. Budget Expectation # 8 (Contd.) • Salaried employees are always considered as one of the main contributors towards direct taxes. Govt. should allow some additional benefits to the salaried employees by reintroducing the standard deductions type of provisions.

11. Budget Expectation #9 • There are several allowances which are allowed to an employee by his employer which are exempt from tax up to certain threshold limits. • These threshold limits are too insufficient as they were never revised, inter-alia, Children-Education Allowance is exempt up to Rs.100 per month, hostel expenditure is exempt up to Rs.300 per month, etc. • The Govt. should immediately increase the threshold limits of these allowances and link them with inflation index.

12. Budget Expectation #10 • An employee is allowed exemptions from House Rent Allowance if he is paying rent for his residential house. Higher deductions are allowed to employees who are in four metropolitan cities, i.e. Mumbai, Delhi, Kolkata and Chennai. • The rental charges for a house in cities like Bengaluru or Hyderabad are not less in contrast to aforesaid 4 metropolitan cities. • Therefore, Govt. should also include many other cities in the category of higher exemptions for HRA in cities like, Bengaluru, Hyderabad, Pune, Ahmedabad, Jaipur, Noida, Gurgaon, etc.

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