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A Deloitte survey of pre-Budget expectations of managers on personal income tax shows that most give a thumbs-up to aligning the tax year with the calendar year. Jurisdiction-free e-assessment of tax returns, a gradual reduction in personal tax rates in line with changes to the corporation tax structure and enhanced tax breaks for education of kids are among other key Budget 2018 demands from Finance Minister Arun Jaitley.
Indian managers are keen to align the tax year (April-March) with the calendar year (January-December), despite chances of initial hardships. In a survey of around 700-odd managers, a majority of respondents (84 per cent) want the Indian tax year to be changed from the financial year to the calendar year. A little over half (52 per cent) are in favour of bringing agricultural income under the tax ambit. Interestingly, one-third of the respondents (33 per cent) did not agree to tax on agriculture income.
Close to two-thirds (64 per cent) of the respondents gave an equivocal thumbs-up to the concept of jurisdiction-free e-assessment. E-assessments are seen as part of the tax department's endeavour to expedite and simplify assessment proceedings, reduce the taxpayer's inconvenience and stamp out corruption. However, 20 per cent of the respondents believe that this move would not be beneficial. The remaining 16 per cent are not sure if this move would be of any help.
In line with the gradual reduction of corporation tax rates for domestic companies from 30 per cent to 25 per cent, most respondents are in favour of a similar reduction in the tax rates for individuals from 30 per cent to 25 per cent. A majority of the survey respondents (86 per cent) are of the view that a similar reduction of tax rate should be given to individual taxpayers. The survey noted that any reduction in the tax rate would place more money in the hands of end consumers, resulting in a boost for domestic demand.
Salaried employees are keen to see an increase in the limit for deduction under Section 80C towards certain payments and investments, currently capped at Rs 150,000. A majority of the respondents (80 per cent) desire the limit under Section 80C to be increased to Rs 250,000. The remaining 20 per cent want the ceiling raised to Rs 200,000. "Such benefits would be two-fold, wherein individual taxpayers would be willing to save more and, in turn, will benefit from a lower tax outgo," the survey noted.
There is a strong demand (79 per cent) among respondents for re-introduction of the tax-saving infrastructure bonds. Out of these, 58 per cent of the respondents indicated that the deduction should be reintroduced with a limit of Rs 50,000, while 21 per cent of respondents were of the view that the deduction be reintroduced with a limit of Rs 35,000.
The survey said such a deduction would provide additional avenue for individuals to make investments and save taxes. At the same time, it would provide funds to finance various infrastructure projects, the survey added.
Citing the rising cost of education, a majority of the respondents (94 per cent) indicated an additional deduction should be introduced towards the expenses incurred for the education of up to two children with a minimum limit of Rs 50,000 per annum per child. Around 55 per cent are in favour of raising the limit to Rs 100,000 per annum per child, while 39 per cent want the limit to be Rs 50,000 per annum per child.
All survey respondents are in favour of increasing the existing basic exemption limit of Rs 250,000. A majority of the respondents (55 per cent) want the basic exemption limit to be raised from Rs 250,000 to Rs 300,000, followed by 29 per cent who want the limit to go up to Rs 400,000. The remaining want the exemption limit to go up to Rs 500,000.
The tax-free limit for medical expenses, which currently is Rs 15,000 annually, was considered inadequate by all respondents. More than half the respondents (58 per cent) are in favour of increasing the limit to Rs 40,000 annually, while the remaining (42 per cent) want to double the limit to Rs 30,000.
Currently, a salaried employee is allowed tax exemption on education allowance of up to Rs 100 per month for up to two children. A majority of respondents (60 per cent) believe that the exemption should be increased to Rs 5,000 per month per child. The remaining are equally divided, with 20 per cent pitching for Rs 2,000 per month per child, while the rest (20 per cent) want it pegged at Rs 3,000.
According to Homi Mistry, partner, Deloitte India, the ever-increasing cost of basic necessities like housing, education, medical cost, food, etc has put the post tax income in the hands of the common man under pressure. “To neutralise the increase in costs, they expect that additional tax benefits be given which will increase their savings and at the same time take care of their incremental costs,” said Mistry.
Any free meal that is provided by the employer to the employee is taxable if the value exceeds Rs 50 per meal. All managers want this limit to be increased in the range of Rs 100 to Rs 200 per meal.
Two out of every five respondents (42 per cent) want it to be raised to Rs 200 per meal, the remaining want it in the range of Rs 100 to Rs 150.
In case of self-occupied properties, 50 per cent of managers who own homes want that the deduction on housing loan should be increased from Rs 200,000 to Rs 500,000. Around 38 per cent want the deduction level to go up to Rs 350,000.