Budget 2018: Will Standard Deduction Make A Comeback In India?

There is an increasing clamour for re-introduction of standard deduction. Until 2004-05, the salaried class used to get standard deduction. In almost every budget, this expectation used to stand on the top of list, and this year too, it will be no different. Considering there is no separate deduction available to salaried class for claiming legitimate expenses incurred in performing their jobs, standard deduction may be re-introduced at 20% of the gross salary with a cap of, say, Rs 100,000. This will help in bringing this category of individuals at a par with business class, who can claim business expenses for tax purposes.

Any bounty for Salaried Class?

Currently any meal provided by an employer during working hours in office premises is exempt to the extent of Rs 50 per meal per day. This limit is felt to be too low by the employers and it is desirable that the meal limit be raised to Rs 150 per meal per day.

Increased cost of medical treatment calls for enhancement of the tax-free medical reimbursements by the employer from Rs 15,000 to Rs 50,000. Interestingly, this limit has not been changed since 1998.

Nowadays, the trend of Indians travelling overseas for vacation is on the rise. A t present, the tax relief for salaried class in relation to leave travel assistance (LTA) is restricted to two journeys within India in a block of four calendar years. Exemptions may be allowed every year on a financial year basis and international destinations may too be made eligible for exemption. It would also be good if the ambit of this relief is enhanced and other expenses, such as, boarding, lodging, etc., are made eligible for deduction, including air fare costs.

With increasing number of two-income nuclear families, there has been some expectation of tax break on crèche facility/allowance provided by employer.

Section 80C deduction comprises saving instruments, including expenditure on children education and repayment of principal housing loan, among others. The current limit is generally exhausted by mandatory contributions to the Employee’s Provident Fund and on repayment of principal for housing loans, or tuition fees in certain cases, thus, leaving no room for additional investment in other instruments. In light of this, the deduction may be raised to Rs 250,000 to incentivize taxpayers for long-term savings.

In addition, a separate deduction of Rs 50,000 per annum may be introduced for investment in Sukanya Samriddhi Yojana to promote savings for the girl child.

Currently, where one owns more than one residential property and the second property is not let out, the individual is required to pay tax on notional rent, as if the second property was let out. Even those who live in their own house, but rent out the same for part of the year, are also required to pay tax on the notional rent for the period they occupied their house during the year. For example, Mr A resided in his own house till December in Delhi and, thereafter, he got posted to Mumbai. He lets out his house for the remaining part of the year (December to March, i.e., four months). Under current tax laws, the individual is required to pay tax on the actual rent for a four-month period and also on the notional rent for the eight-month period. This is real hardship to such individuals who end up paying taxes on the notional for the period when they stayed in their own house. It is expected that amendment be brought in to remove such notional taxation and levy taxes on the actual rent only.

Deduction against interest on home loan taken for a self-occupied house property is restricted to Rs 2 lakh. The pre-construction period interest is eligible for deduction in five equal installments beginning with the year in which construction is completed. The limit for deduction for such interest, along with that year’s interest is restricted within the overall limit of Rs 2 lakh. Considering that the builder takes longer time to complete construction, there is higher interest charge and that merits enhancing the limit from Rs 2 lakh  to Rs 3 lakh. Similar enhancement of limit (from Rs 2 lakh) should also be made which was put last year for adjustment of loss under the head house property against other sources of income. This will give a push to investment in the housing sector.

Courtesy: Outlook Money