Mukesh Patel.in
practical tax & investment planning online
international tax expert / columnist / author / speaker

KEEP PACE WITH THE TIMES MR. FM!

Revise age-old exemptions linking them with cost inflation index & rationalize TDS threshold & rates!

Lord Vishnu, in his ‘Vaman Avtar,’ sought just three steps of land from Raja Bali and in the process covered ‘Triloka.’ On the eve of Budget 2013, if God were to ask me to make it even shorter and seek just one wish to be fulfilled by the FM for the Indian taxpayer today, I would promptly plead ‘grant real time reliefs!’

       Waiting for the Lord to say ‘Tathastu,’ I would immediately sit down to work out the bounty I would have reaped for the Indian taxpayer and rejoice in joy! Let me explain how. As clear from the accompanying chart, if a taxpayer in the maximum tax bracket of 30.9% were to enjoy even five limits of exemption/deduction under the Income-tax Act in respect of housing loan interest, savings u/s. 80C, medical reimbursement, transport allowance and children’s education allowance (the latter three in the case of a salaried), on the basis of the adjusted amounts in tune with the index of inflation as announced for computation of capital gains, he would right away reap a healthy tax saving of over Rs.1,45,539. (more…)

HEALTH, HOUSING & EDUCATION!

Budget 2013 needs to focus on these three key sectors and grant meaningful tax reliefs!

Oliver Wendell said, “Taxes are the price we pay for Civilization.” While revenues must be collected from taxpayers to be utilized for allocation towards decent housing, quality health and basic education for the poor and deserving, those who pay taxes must also enjoy adequate tax incentives for serving their own needs and amenities on this account.

TAX BREAKS FOR EDUCATION

No wonder if you hear an honest Indian taxpayer quipping, “Why the hell am I paying education cess on my income-tax, when I am hardly getting any tax incentives for educating my own children?”

Just consider the provisions for deduction in regard to children’s education under Section 80-C, which suffer from severe limitations. Such deduction is available only in respect of ‘tuition fees’ paid to any university, college, school or other educational institution within India. The FM should earnestly consider covering several other legitimate heads of expenditure for education such as books, stationery, school transportation, extra coaching, etc. within the scope of tax breaks for children’s education. Moreover, expenditure for overseas education of children should also find place for deduction. (more…)

TOP SAVINGS CHOICE FOR SENIORS!

SCSS gets thumbs up on counts of security, return, tax saving & liquidity! 

            The Senior Citizens Savings Scheme (SCSS) has opened up a good investment opportunity for Senior Citizens desirous of making a secured investment of upto Rs.15,00,000 earning a reasonable return of 9.30% per annum (9% per annum till 31st March, 2012). With effect from F.Y. 2007-08, SCSS also having been notified as an eligible deduction for purposes of Section 80C, investment under this scheme has become even more attractive. 

INVESTMENT HIGHLIGHTS

            The Senior Citizens Savings Scheme permits investment for all individuals who have attained the age of 60 years or above.  Moreover, as a special case, individuals in the age group 55 to 60 years, who have retired under a Voluntary Retirement Scheme (VRS), have also been permitted to invest in the Scheme, subject to the condition that the Deposit Account is opened by them within three months of the date of their retirement and a Certificate from their employer is attached in this regard.

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STIPENDS ARE TAX EXEMPT!

Stipends, awards, fellowships & grants for education have been held as scholarships exempt from tax!

Under Section 10(16) of the Income-tax Act, any scholarship granted to a person to meet the cost of education is exempt from tax. The term ‘scholarship’ has been interpreted liberally to also include within its scope and ambit, amounts of fellowships, stipends, grants for travel and incidental expenses, etc. awarded for acquiring education.

STIPEND IS NOT SALARY

In the case of ‘A. Ratnakar Rao vs. Addl. CIT’ 128 ITR 527, the Karnataka High Court had occasion to consider whether the trainee’s stipend granted to a physician to further his education and training was exempt under Section 10(16). The Income-tax Department took the view that the amount received by the taxpayer was not in the nature of scholarship, but it was salary for the services rendered.

The High Court held that the amount paid to the taxpayer was for the benefit of securing training and pursuing study and research in medicine and the entire amount received from the hospital was in the nature of scholarship and not for services rendered and services, if any, rendered by the taxpayer were only incidental to the course of practical training. (more…)

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