Union Budget 2018 Expectations by Individual Taxpayers

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  • Last Updated on 25 January, 2021

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Union Budget 2018-19:

The Union-Budget for the Financial Year 2018-19 is expected to be presented on February 1, 2018. This would be the last full budget of NDA Government, as the budget for next year shall be an interim budget. Owing to which individual taxpayers are expecting the Govt. to provide major tax benefits in order to spread some positive sentiments.
 
There are certain provisions of the Income-tax Act that are completely outdated as some of them were introduced a couple of years, whilst others a few decades back. As a result there is a need to review them and upgrade such outdated provisions. 
 
In terms of personal taxation, here’s a list of recommendations for the CBDT:

1. Standard Deduction for Salaried Employees:

There are various expenses that an employee incurs during the course of his employment for which no deduction is available to him. So earlier, there was an additional deduction, i.e., standard deduction was available explicitly against salary income. In the assessment year 2006-07, this deduction was withdrawn. Although a taxpayer who is carrying on a business can still claim deductions for the similar expenses. For instance, an employee who is using his personal car for commuting between office and house gets no deduction for the running & maintenance expenses of the car.
 
The salaried employees are always considered as one of the major contributors in direct taxes collection. As per the return filing statistics, it has been noted that the maximum number of returns is being filed in the Form ITR 1, which is generally used by salaried and pensioners. Thus, Government should allow some additional benefits to the salaried taxpayers by re-introducing the standard deductions or make such similar provisions.
 

2. LTA Benefits for Foreign Travels:

As of now, an employee is allowed to claim exemption for the Leave Travel Allowance or LTA on domestic vacations, i.e. a trip taken to any destination anywhere within India. Originally this exemption was intended to promote Indian Tourism among the domestic travellers.  However, it is not in pari-materia with the current scenario where travelling to some overseas destinations is found to be cheaper than visiting Indian travel destinations. Thus it is recommended that the benefits of this exemption should be extended to the travels to the foreign destinations as well.

3. Revision of Limits for Salaried Employees:

There are several allowances which enjoy tax exemption to a certain limit. These threshold limits are insufficient in lieu with today’s scenario. For instance, Children Education Allowance is exempt up to Rs. 100 per month that is, Rs. 1200 p.a., Hostel Expenditure is exempt up to Rs. 300 per month or Rs. 3,600 p.a, etc. 
 
In the last decade itself, the expenditure on education, accommodation services, etc. has increased significantly. Hence, there is an urgent need to increase the threshold limits of various allowances like the ones mentioned above.

4. Increase in the Limit of Medical Reimbursements:

In the year 1999, Government introduced the special deduction of Rs. 15,000 towards expenses reimbursed by employer in relation to medical expenses.  However, in the past 18 years, cost of medical treatments has witnessed a manifold increase. It is, therefore, recommended that this exemption limit should be raised to a minimum amount of Rs. 50,000, keeping in consideration the hike in the cost of medical treatments.

5. Increase in the time period to buy new house for Sec. 54 or 54F exemptions:

An exemption can be claimed for LTCG or Long-Term Capital Gain if, person re-invests the amount to buy or construct a new residential house within a time of 1 year before or 2 years after the date of transfer of old property in case of purchase of a new property and 3 years, if new property is to be constructed.
 
Recently the Government enacted the Real Estate Regulatory Authority (RERA) Act to regulate the real estate sector. Under RERA, currently there is no such maximum time limit for completion of construction of a property. Though, it provides that the builder has to deliver the property within the time limit agreed upon between the transacting parties.
 
In today’s scenario, for any bigger residential project or township, the developer normally takes a minimum period of 5 years for handing over the possession of the property to its buyer or buyers. In that case, he is not allowed to claim Sec. 54/54F exemption as he has exceeded the time limit of 3 years. Therefore, suitable amendments are required to allow exemptions under section 54/54F to the genuine taxpayers who have decided to invest in a project that is being developed by a builder registered under the RERA.

6. HRA –Add More Cities to ‘Metropolitan’ Category:

The Income tax Act provides for an exemption to the House Rent Allowance received by an employee for the rent it pays for his residential accommodation. Currently, the employee can claim higher deductions for HRA if he is residing in any of the four metropolitan cities such as Delhi, Mumbai, Chennai and Kolkata.  Apart from these 4 cities, the rental charges in cities like Bengaluru or Hyderabad are equal or even higher than the rent charges in the cities like Delhi or Kolkata. This has been partly due to the fact that in the last few decades, some of the Indian cities has seen steep rise in development in their infrastructure which has led to an increase in the rental charges. As a result there is an urgent need for the inclusion of cities like, Bengaluru, Hyderabad, Pune, Ahmedabad, Jaipur, Noida, Gurgaon, etc. in the category of metropolitan cities.

7. Raise the Maximum Threshold of Deduction under section 80C:

Currently, Section 80C allows a deduction of up to Rs. 1,50,000 for making investments like payment of life insurance policy, repayment of housing loan, investing in PPF, children education expenses, etc. 
 
As a result various investment schemes have been losing their sheen. Considering the current scenario, it is vital to raise this limit to allow benefits to individuals, so as to channelize the maximum investment, in order to revive the economic growth. Therefore, it is recommended that maximum deduction under Section 80C should be increased to Rs. 2,50,000.
 
 
 

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