Budget 2015: 9 things FM Jaitley should do to help the taxpayer save more

By Homi Mistry, Mousami Nagarsenkar & Hemani Ajmera The buoyant atmosphere in the country has prompted every individual taxpayer to pin high hopes on the forthcoming Union Budget for 2015-16 to be presented by Finance Minister Arun Jaitley in Parliament on 28 February. Every individual is waiting anxiously for the minister to bring in reforms that will allow him to save some extra money. Income tax being one of the large outgoings, the tax payer is hoping that there will be a reduction on this front, giving him some respite. Some of the expected amendments to income tax provisions are summarised below: [caption id=“attachment_2103789” align=“alignleft” width=“380”] Representational image. Reuters[/caption] 1) Increase in exemption: Over the years, the basic exemption limit for individuals has been steadily increased leading to a reduction in taxes and a higher after tax income for tax payers. It is, therefore, widely expected that the basic slab exemption limit will be further increased in this year’s budget. The finance minister could look at increasing the basic exemption limit to at least Rs 3.5 lakh for individuals who are less than 60 years of age which will translate into a saving of at least Rs 10,300. 2) Standard deduction for salaried: In order to offer some relief to the salaried class a deduction could be allowed as a standard deduction of up to Rs 1 lakh, from salary income, as was done in the past. 3) Increase in 80C deduction: Section 80C allows a deduction from taxable income for investments made by a tax payer in eligible investment avenues. The maximum limit for the deduction under section 80C was increased from Rs 1 lakh to Rs 1.5 lakh last year. The section allows a wide choice of qualifying investment avenues to an individual and the government could consider increasing the limit of the deduction to Rs 3 lakh to allow tax payers to take advantage of this provision. 4) Higher deduction under 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 also be extended to interest on time deposits with an enhancement in the deduction limit to at least Rs 30,000. 5) Double medical reimbursement: Medical reimbursements by the employer are currently exempt up to a maximum of Rs 15,000. Keeping in mind the increasing costs of medical services and cost of medicines, the limit for exemption for reimbursement of medical expenses could be increased to at least Rs 30,000. 6) Increase transport allowance: The exemption of Rs 800 per month as transport allowance for commuting between home and office was fixed many years ago. This necessitates a hike in the exemption limit to at least Rs 4,000 per month. 7) Meal coupons: Currently non-transferable vouchers, usable at eating joints, up to Rs 50 per meal are exempt from tax for a salaried taxpayer. It is recommended that such limit be increased to at least Rs 100 per meal. 8) Children’s income: The exemption available in respect of a minor child’s income clubbed in the hands of the parent was first introduced in 1993 which was Rs 1500 per minor child. This may be increased to at least Rs 10,000 per child. 9) Child Education expense: Given the fact the children’s education expenses are soaring along with inflation, the same should be excluded from the blanket deduction under section 80C of Rs 1.5 lakh and be allowed as a separate deduction of up to Rs 1 lakh. As this Budget will be the first full-fledged budget by the new government, the expectations all around are high. One hopes that the finance minister considers these aspects while finalizing the 2015 Union Budget. Homi Mistry is partner, Deloitte Haskins & Sells LLP; Mousami Nagarsenkar is senior manager and Hemani Ajmera deputy manager