Income Tax Expectations From Budget 2014
Million of tax payers are expecting that the Government will cut taxes and raise exemptions and they will be closely watched Mr Arun Jaitly’s first budget. Among the world, India has highest income tax rates. However, Mr Jaitly will be constrained by the precarious state of Government finance.Common man expecting basic exemption limit of income tax for individuals should be raised from 200000 to Rs. 300000.Limits of senior citizens should be raised from 250000 to Rs.350000. This will help the FM in compensating the tax payers for the increased level of inflation. Also expecting deduction for medical insurance premium u/s. 80D,which is currently capped at Rs 15,000 for self, spouse and children and Rs 20,000 for parents, should also be revised upwards considering the double digit medical inflation.
SOME EXPECTATIONS FROM THE BUDGET
1. According to PricewaterhouseCoopers(PwC), exemption limit om income tax should be hiked to Rs.3 lakh. For now there is no tax for income up to Rs. 2 lakh.
2.Mr. Jaitly is expected to double exemption limit on long-term financial savings, currently capped at Rs. 1lakh. Savings instruments such as housing loan repayment(principal), five-year and above tenure fixed deposits, provident funds (PFs)and life insurance policy premiums are some investment vehicles that qualify for tax exemption under Section 80C of the Income Tax Act.
3. Mr. Jaitly may increase the tax rate on high earners or may impose even higher tax on people earning more than Rs. 10crore annually.Individuals with taxable income above Rs. 1 crore have to pay a surcharge of 10 per cent.
4. Lower corporate tax: Domestic companies effective tax rate is nearly at 34 per cent.
5.Corporates also want a review of the applicability of minimum alternate tax (MAT) and dividend distribution tax to units at Special Economic Zone during the tax-holiday period. Minimum alternate tax of 18.5 per cent and dividend distribution tax of 15 per cent were imposed in 2011-12.
6. Analysts say, the cigarettes and other tobacco products will become costlier due to the excise duty on cigarettes may go up by 15-20 per cent.
7.Raise ceiling on medical reimbursement and conveyance allowance: Limits on these sub-heads have not changed for the last many years and have lost their relevance. Healthcare costs have gone up substantially and so have fuel costs, necessitating a rethink over these exemption.
These are some expectation from the new government’s budget. After all, hit hard by high inflation and slow income growth in the last few years, the middle and lower income groups have struggled to make their both ends meet, leave alone saving.