Budget 2013: 'Raise home loan interest deduction to Rs 5 lakh'

By Mousami Nagarsenkar and Bhavin Rajput The Budget is just around the corner and once again the common man is waiting eagerly to see what’s in it for him. In today’s times of rising prices and increased costs of living, the common man looks forward to having additional cash in his hands after the deduction of various taxes. Some of the measures a common man would expect to see from this budget are summarized below: Increase in basic tax exemption limit: An increase in the basic tax exemption limit by at least Rs 1 lakh across the board as per the below table, would provide the much needed relief, especially to retired senior citizens and the relatively lower income groups while simultaneously encouraging greater tax compliance. **See table 1** [caption id=“attachment_631541” align=“alignleft” width=“380”]  The salaried taxpayer pays tax on his entire gross salary. Moneycontrol.com[/caption] Standard deduction for salaried class: The salaried taxpayer pays tax on his entire gross salary and often feels discriminated in comparison with the tax payers with business income who are eligible for various deductions from the gross income. Hence in order to offer some relief to the salaried class a deduction of 30 percent of salary or Rs 75,000 whichever is lower could be allowed as a standard deduction from salary income. Increase in deduction for interest on housing loan: After being static at Rs 1.5 lakh for over a decade, it would be prudent to increase this limit for deduction in respect of interest on housing loan to Rs 5 lakh, in line with the bounding costs of housing and swelling interest rates. Likewise, considering the average time taken for completion of a housing project, the time limit for completion of the house could be increased from the current 3 years to at least 5 years. This measure will not only influence the demand in the housing sector but also will provide relief to the tax payer on account of reduction in his taxes. Increase in limit of deduction under Section 80C: The list of investment avenues eligible for tax deduction under section 80C has been increased. However, the maximum cap of deduction from the income has remained at Rs 1 lakh. With such a wide choice of qualifying investments available to an individual, the government could consider increasing the limit of deduction to Rs 3 lakh. Additionally, widening the scope of tax saving investments to include investments in IPOs could provide a further boost to the capital markets. Reinstatement of deduction under Section 80CCF: A deduction was available under section 80CCF up to Rs 20,000 paid or deposited as subscription to notified long –term infrastructure bonds. The deduction was withdrawn from assessment year 2013-2014 much to the disappointment of the tax payers. The deduction could be reinstated with an increased limit of Rs 1 lakh allowing the tax payer to contribute to the country’s infrastructure development while also savings his taxes. Higher deduction under Section 80TTA: A deduction of Rs 10,000 is currently available in respect of interest on savings accounts with banks and certain institutions. To encourage small savings the deduction under Section 80TTA could be expanded to interest on time deposits with an enhancement in the deduction limit to at least Rs 30,000. Increase in limit of medical reimbursements under Section 17: Medical reimbursements by the employer are currently exempt up to a maximum of Rs 15,000. With the steep increase in the cost of medicines and routine medical treatment, it is recommended that the limit for reimbursement of medical expenses be increased to Rs 50,000 per annum. Increase transport allowance exemption limit: With fuel price hikes and the increase in the cost of public transport, the exemption of Rs 800 per month for transport allowance allowed to employees for commuting between home and office has lost its significance. This necessitates that a hike be considered for raising the exemption limit to at least Rs 4,000 per month. Increase in the value of meal coupons: Currently non-transferable vouchers, usable at eating joints, up to Rs 50 per meal are exempt from tax for a salaried taxpayer. Admittedly, food inflation is making food items dearer by the day and the cost of one meal has outgrown this limit. It is, therefore, recommended that such limit be increased to at least Rs 100 per meal. Exemption in case of children’s income under Section 10(32) to be increased: The exemption available in respect of a minor child’s income clubbed in the hands of the parent was first introduced in 1993. Since then, the limit has remained untouched at Rs 1500 per minor child. It may be appropriate to increase the exemption to at least Rs 10,000 per child. While the common man waits expectantly for relief in the form of reduced taxes, we hope the Finance Minister considers the above suggestions while finalising the Budget for 2013. Mousami Nagarsenkar is a Manager and Bhavin Rajput is a Deputy Manager with Deloitte Haskins & Sells