Tuesday 6 March 2012
Budget Expectations: Reduce tax rates
1.Reduce Tax rates.
2. More in-hand savings
3. Better roads.
More employment and investment opportunities are some of the wishes an "Aam Aadmi" expects from the FM -- Pranabda. The Budget- the most important economic event of our country, affects each of the 120 billion people in one way or the other and we are going to witness the same on March 16, 2012 i.e. post the State Elections as promised by Pranabda.
The salaried class is the only class of taxpayers where tax planning opportunities are minimal. The only support in terms of tax saving is through the HRA deduction and perquisites provided by employers which are taxed at concessional rates. One will have to wait to see if the FM brings in some relief by increasing the conveyance allowance from Rs 800 per month (introduced way back in 1997) as compared to a situation today when one has to pay nearly Rs 800 for one taxi ride.
Then the medical reimbursement, which is exempted upto Rs. 15000 only, is also one area which impacts the salaried class when medical costs have sky rocketed. It would be interesting to see if the FM brings in some sops by ways of reduced tax rates, increased exemption limit or even by increasing the limit for interest paid on housing loan repayments. Undoubtedly, the deductions and concessions prescribed for salaries class have not kept pace with the inflationary trends which the country has witnessed and thus, one expects FM to do undertake some rationalisation so that the "Aam Aadmi" can be comforted.
Currently, deduction under section 80 C of the Act is limited to Rs. 100,000. However, with no social security schemes in India that could support people post retirement, the limit of Rs. 100,000 seems to add little savings in times of high inflation. Further, the infrastructure bonds notified in 2010 budget for years 2011 and 2012 have proved to be very successful and have provided additional tax benefits to the people. It would be interesting to see if the government extends the same so as to keep the tax saving window open for the taxpayers and continue the momentum for infrastructure projects currently going on in the country.
Finance Act 2011 carved out a new category of tax payers i.e. individuals attaining the age of 80 years as "very senior citizens" being eligible for a higher exemption limit of Rs 5 lacs, however, as per the Census of India 2011, average life expectancy of males in India is 67.3 years and for female is 69.6 years.
Another anomaly about the age is that for all railways bookings, banking purposes, the age of senior citizens is 60 years, whereas for income tax purposes only, the age of senior citizen is 65 years. Notwithstanding the overall loss to tax kitty which could occur due to reduction of age for senior citizen and very senior citizens to 60 years, one could expect Government to support life standards of citizens who contributed in their prime and now expect respect and relief. They are akin to elders of our nation and deserve-care and attention.
The corporate houses would also be looking at rationalization of tax rates so as to be at par with the emerging markets of the world. With the MAT rate at 18.5 %, the "Minimum Alternate Tax" has lost its sheen and is more of an alternative tax. Further, with imposition of MAT and Dividend Distribution Tax on SEZ units, some correction in the budget is desirable.
Recently, it was reported in media reports that the there is almost INR 44,500 crores locked up in transfer pricing litigation. The Advance Pricing Arrangement mechanism which is an alternative to the appeal process has not yet seen light of the day in India but is quite effective in other countries. With no mandatory time limit to dispose of appeals by the Commissioner (Appeals), how the government deals with the situation of pending litigation and tax recovery is yet to be seen.
2. More in-hand savings
3. Better roads.
More employment and investment opportunities are some of the wishes an "Aam Aadmi" expects from the FM -- Pranabda. The Budget- the most important economic event of our country, affects each of the 120 billion people in one way or the other and we are going to witness the same on March 16, 2012 i.e. post the State Elections as promised by Pranabda.
The salaried class is the only class of taxpayers where tax planning opportunities are minimal. The only support in terms of tax saving is through the HRA deduction and perquisites provided by employers which are taxed at concessional rates. One will have to wait to see if the FM brings in some relief by increasing the conveyance allowance from Rs 800 per month (introduced way back in 1997) as compared to a situation today when one has to pay nearly Rs 800 for one taxi ride.
Then the medical reimbursement, which is exempted upto Rs. 15000 only, is also one area which impacts the salaried class when medical costs have sky rocketed. It would be interesting to see if the FM brings in some sops by ways of reduced tax rates, increased exemption limit or even by increasing the limit for interest paid on housing loan repayments. Undoubtedly, the deductions and concessions prescribed for salaries class have not kept pace with the inflationary trends which the country has witnessed and thus, one expects FM to do undertake some rationalisation so that the "Aam Aadmi" can be comforted.
Currently, deduction under section 80 C of the Act is limited to Rs. 100,000. However, with no social security schemes in India that could support people post retirement, the limit of Rs. 100,000 seems to add little savings in times of high inflation. Further, the infrastructure bonds notified in 2010 budget for years 2011 and 2012 have proved to be very successful and have provided additional tax benefits to the people. It would be interesting to see if the government extends the same so as to keep the tax saving window open for the taxpayers and continue the momentum for infrastructure projects currently going on in the country.
Finance Act 2011 carved out a new category of tax payers i.e. individuals attaining the age of 80 years as "very senior citizens" being eligible for a higher exemption limit of Rs 5 lacs, however, as per the Census of India 2011, average life expectancy of males in India is 67.3 years and for female is 69.6 years.
Another anomaly about the age is that for all railways bookings, banking purposes, the age of senior citizens is 60 years, whereas for income tax purposes only, the age of senior citizen is 65 years. Notwithstanding the overall loss to tax kitty which could occur due to reduction of age for senior citizen and very senior citizens to 60 years, one could expect Government to support life standards of citizens who contributed in their prime and now expect respect and relief. They are akin to elders of our nation and deserve-care and attention.
The corporate houses would also be looking at rationalization of tax rates so as to be at par with the emerging markets of the world. With the MAT rate at 18.5 %, the "Minimum Alternate Tax" has lost its sheen and is more of an alternative tax. Further, with imposition of MAT and Dividend Distribution Tax on SEZ units, some correction in the budget is desirable.
Recently, it was reported in media reports that the there is almost INR 44,500 crores locked up in transfer pricing litigation. The Advance Pricing Arrangement mechanism which is an alternative to the appeal process has not yet seen light of the day in India but is quite effective in other countries. With no mandatory time limit to dispose of appeals by the Commissioner (Appeals), how the government deals with the situation of pending litigation and tax recovery is yet to be seen.
