Union Budget expected to focus on increase in limits for basic tax exemption, standard deduction
Union Budget expected to focus on increase in limits for basic tax exemption, standard deduction
The Union Budget is expected to focus on employment generation, increase in limits for basic tax exemption, standard deduction, medical expenses, rationalisation of tax rates and certain social security investments. Currently, Section 16(1A) of the IT Act provides for a standard deduction of Rs 50,000 from the salary income of a taxpayer. This deduction was enhanced from Rs 40,000 to 50,000 by the Finance Act 2019 and has not been increased since then.
However, considering the rising inflation and cost of living, there is a need to increase such standard deduction for the salaried personnel from Rs 50,000 to Rs 60,000 in case there is no increase in the basic exemption limit, said Suresh Surana, Founder - RSM India.
Currently, section 80TTA provides deduction up to Rs 10,000 p.a. only with respect to the interest from savings bank accounts with banks/co-operative society/post office.
However, for the purpose of enabling majority of taxpayers to avail this tax benefit, the existing scope of the said section needs to be expanded in order to cover other types of interest such as interest on bank/post office term deposits, recurring deposit etc. Moreover, such threshold limit of Rs 10,000 also needs to be enhanced to Rs 20,000 as there was no change in the limit since its introduction by Finance Act 2012, Surana added.
There are numerous exemptions available with negligible upper limits such as Children Education Allowance (Rs.100 pm per child), Children Hostel Expenditure Allowance (Rs 300 pm per child). The limit with respect to such deductions is not in consonance with the present education cost and needs to be adjusted for inflation and accordingly, enhanced.
Further, the exemption limit of Rs 1,500 u/s 10(32) applicable at the time of clubbing of minor's income under section 64(1A) was last revised in 1993 and thus, an upper revision in the same is long overdue. Such exemption limit may be hiked to Rs 15,000 considering the inflation in last 28 years. It may be worthwhile to consolidate all deductions pertaining to the children in one single consolidated deduction of Rs 20,000 per child, Surana added.
The threshold limit of Rs 10,000 for payment of advance tax was last amended by Finance Act, 2009. Considering the inflation in the economy over the last 12 years as well as reducing compliance burden, there is a need to increase the threshold limit from the present Rs 10,000 to Rs 30,000.
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