The salaried class would be eagerly awaiting finance minister Arun Jaitley's maiden Budget speech, likely in mid July. And why not. Just a month before the NDA won the elections with a huge majority, Jaitley had suggested that the Income Tax exemption limit should be raised to Rs 5 lakh from Rs 2 lakh currently.
Industry body CII in its report titled Pre-Budget Memorandum 2014-15 has outlined a slew of changes that should be made by the FM in that section of the Income Tax Act, which impacts the salaried class.
Below are the excerpts from the report
> Section 17 of the Income Tax Act, 1961 has been amended to include superannuation contributions made by an employer to the account of its employee as a perquisite. Accordingly, as per Section 17(2) (vii), superannuation contribution by the employer in excess of Rs 1 lakh would be considered as part of the employee’s salary income; thereby increasing the withholding tax liability in his hands..
> Provision to section 17(2) of the Act, medical reimbursements not exceeding Rs 15,000 per annum for employee and his family are exempt. This limit needs to be revised and limit for exemption for medical reimbursements should be increased to Rs 75,000 per annum
> (As per rule 2BB of section 10(14) Limit of transport / conveyance allowance of Rs 800 per month not taxable was fixed long ago and since then the transport cost had increased multifold, thus this limit should be rationalized to a minimum of Rs 3,000 per month.
> Children education allowance should also be increased to Rs 2,000 per month, as the current limit of Rs 100 per month, is too less and does not reflect the high expenses involved in the current education system. Currently, the school fees varies from Rs 2,000 to Rs 5000.
> Children hostel allowance should also be increased to Rs 4,500 per month, as the current limit of Rs 300 per month, is too less and does not reflect the high expenses involved in the current system.
> An independent deduction separate from the deduction under section 80C of the Act, in respect of housing loan repayments (principal) should be provided. This will help motivating people to repay the housing loans at a time when inflation is very high.
> Standard Deduction from salary, which was withdrawn from the Assessment Year (‘AY’) 2006-07 should be revived. A standard deduction of Rs 75,000 or 10 percent of salary will bring great relief to salaried individuals. This deduction was earlier available under Section 16(1).
> The exemption limit of Rs 50 on the provision of free meals was introduced in 2001, since then the costs have increased multifold, thus this limit should be rationalized to a minimum of Rs 150 to help the common man cope with rising prices of food items.
> The exemption limit of leave encashment under section 10(10AA)) should be raised to Rs 10 lakhs.
> It is suggested with an increase in trend of travelling overseas, overseas travel should also be included within the purview of exemption for Leave Travel Allowance (LTA)
> It is suggested calendar years should be replaced with the concept of Financial Year.
> It is suggested that LTA exemption should be allowed each year as compared to twice in block of four year.
> It is suggested to clarify that the benefits under section 80CCD is applicable to employees irrespective of the date of employment. Since this benefit is over and above other retirement benefits the deduction in respect of employee contribution to National Pension Scheme should be allowed over and above the limit of Rs 100,000 under chapter VIA.