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

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.

The current provision for deduction u/s. 80E in respect of interest payable on loans for higher education is indeed welcome; however, banks and financial institutions must be encouraged to offer such loans at concessional interest rates as against the prevailing rates of 12% to 13% per annum.

Under Section 17, expenditure upto Rs.1,000 per month incurred by an employer is treated as an exempt perk, only if free educational facilities are provided for study of the employee’s child in an educational institution run by the employer. It is indeed difficult to understand as to why such benefit should not be allowed, where the child is studying in some other institution not owned by the employer and if the employee is reimbursed by the employer for a similar amount.

ROOM FOR HOUSING RELIEF

The limit of Rs.1,50,000 for deduction u/s. 24 for interest paid on housing loan was introduced in 1999, when the personal income-tax exemption limit was Rs.60,000. Keeping in view the steep rise in realty prices over the past 14 years, the same needs to be suitably increased, atleast upto Rs.4,00,000.

Moreover, the provision in regard to allowing deduction in respect of repayment of principal u/s. 80C within the overall limit of Rs.1,00,000, has limited room for effective tax benefit. Infact as in many other tax systems, the entire EMI of the housing loan should be treated as eligible for a straight deduction from income, subject to a specified ceiling.

The limit of deduction u/s. 80GG for house rent paid, prescribing a ceiling of Rs.2,000 per month (Rs.24,000 per annum) fixed 17 years ago in 1996 is highly unrealistic in 2013. Even going by the simple cost inflation index parameters, this limit should be raised to atleast Rs.5,000 per month.

CALL FOR A HEALTHY HIKE!

In respect of reimbursement of medical expenses given by an employer to his employee, the exemption limit of Rs.15,000 has remained stagnant for over 15 years since 1998 and the same needs a healthy hike of upto Rs.50,000 per annum, as suggested in the draft Direct Tax Code (DTC).

And a plea for Indian senior citizens, who unlike their counterparts in many other countries, are not assured of any social security or free health cover in the present Indian scenario. The Budget should provide them atleast affordable health insurance to maintain their quality of life in their sunset years.

STANDARD DEDUCTION FOR SALARIED

Capital market investors earn their dividends and long term gains free of tax. Rent-earners enjoy a flat 30% standard deduction. Businessmen and professionals can write-off a host of expenses while offering their taxable income. Will the FM P. Chidambaram, who was responsible for withdrawing the same in 2004, reinstate a reasonable standard deduction for the salaried class? And also consider rationally revising several age-old limits of exemptions for allowances and terminal benefits for salary earners, who suffer most under the pressures of inflation?

Leave a Reply

You must be logged in to post a comment.

Powered by Epaperz.com | Hosted at HostADomainNow.com