TaxTMI 
TaxTMI 
TaxTMI 
Threshold Limit
The exemption limit is expected to be increased from Rs 1,80,000 to Rs 3,00,000. This will increase the disposable income of the salaried individual and would be a welcome change.
Realignment of Income tax slab:
Currently, the highest tax rate of 30% is applicable to income above Rs 8,00,000 per year. This limit could be enhanced to Rs 10,00,000 thereby resulting in some savings and also aligning the slabs with the proposed Direct Tax Code (DTC).
Increase in deduction amount under section 80CCF of the Income tax Act, 1961 (Act):
Given the focus on Infrastructure development, one can look forward to higher deduction for investment into infrastructure bonds u/s 80 CCF. Currently, the deduction limit u/s 80CCF is restricted to the extent of Rs 20,000 and the proposed DTC does not provide this deduction.
Deduction of interest repayment under the head Income from House Property:
Under the current tax laws, the repayment of interest amount towards purchase/ construction of a self occupied house property is eligible for deduction to the extent of Rs 1,50,000. In view of the raising property prices, the deduction limit could be enhanced. This could bring a relief to the salaried individual who has borrowed and invested in a self occupied residential house.
Removal of provisions relating to deemed let out house property:
Currently, if an individual has two house properties which are self occupied, one house property will be treated as self occupied and the other will be treated as deemed let out house property. The taxation is done based on the deemed rental value. Considering that the determination of notional rental value could lead to unnecessary litigation, this provision can be done away with and the proposed DTC also suggests the same.
Deduction limit under section 80C of the Act:
Increase in deduction limit under section 80C could enhance the disposal income for salaried individual. Considering the type of investments that are covered under this section, the present deduction limit of Rs 1,00,000 could be increased. Recently, the limit for PPF has also been increased from Rs 70,000 to Rs 1,00,000.
Transport Allowance:
Considering the inflation and rise in fuel cost, the exemption limit for transport allowance to meet expenditure of commuting from residence to the place of work may be increased from the current limit of Rs. 800 which is not comparable to the expenditure levels.
Children Education Allowance:
The exemption limit for Children Education allowance may be raised from the current limit of Rs.100 per month per child for maximum 2 children or actual expenses, whichever is less.
House Rent Allowance (HRA) exemption
Considering the increase in rental amounts, the exemption allowed under section 10 (13A) of the Act could be increased by the Government.
Under the current tax laws, the exemption is limited to the least of the following -
- Actual HRA received
- Rent paid in excess of 10% of salary
- 40% of salary or 50% of salary (in case of metros)
The salaried class will benefit if the Government re-looks at the above formula which provides little benefit to the salaried class who pays rent.
Reimbursement of Medical Expenses:
Considering the present cost of medical facilities and medicines, the exemption limit could be increased from the current limit of Rs 15,000. The DTC has proposed the limit to be increased to Rs 50,000. The exemption limit was increased from Rs 10,000 to Rs 15,000 by the Finance (No.2) Act, 1998.
Realignment of Income tax slab:
Currently, the highest tax rate of 30% is applicable to income above Rs 8,00,000 per year. This limit could be enhanced to Rs 10,00,000 thereby resulting in some savings and also aligning the slabs with the proposed Direct Tax Code (DTC).
Increase in deduction amount under section 80CCF of the Income tax Act, 1961 (Act):
Given the focus on Infrastructure development, one can look forward to higher deduction for investment into infrastructure bonds u/s 80 CCF. Currently, the deduction limit u/s 80CCF is restricted to the extent of Rs 20,000 and the proposed DTC does not provide this deduction.
Deduction of interest repayment under the head Income from House Property:
Under the current tax laws, the repayment of interest amount towards purchase/ construction of a self occupied house property is eligible for deduction to the extent of Rs 1,50,000. In view of the raising property prices, the deduction limit could be enhanced. This could bring a relief to the salaried individual who has borrowed and invested in a self occupied residential house.
Removal of provisions relating to deemed let out house property:
Currently, if an individual has two house properties which are self occupied, one house property will be treated as self occupied and the other will be treated as deemed let out house property. The taxation is done based on the deemed rental value. Considering that the determination of notional rental value could lead to unnecessary litigation, this provision can be done away with and the proposed DTC also suggests the same.
Deduction limit under section 80C of the Act:
Increase in deduction limit under section 80C could enhance the disposal income for salaried individual. Considering the type of investments that are covered under this section, the present deduction limit of Rs 1,00,000 could be increased. Recently, the limit for PPF has also been increased from Rs 70,000 to Rs 1,00,000.
Transport Allowance:
Considering the inflation and rise in fuel cost, the exemption limit for transport allowance to meet expenditure of commuting from residence to the place of work may be increased from the current limit of Rs. 800 which is not comparable to the expenditure levels.
Children Education Allowance:
The exemption limit for Children Education allowance may be raised from the current limit of Rs.100 per month per child for maximum 2 children or actual expenses, whichever is less.
House Rent Allowance (HRA) exemption
Considering the increase in rental amounts, the exemption allowed under section 10 (13A) of the Act could be increased by the Government.
Under the current tax laws, the exemption is limited to the least of the following -
- Actual HRA received
- Rent paid in excess of 10% of salary
- 40% of salary or 50% of salary (in case of metros)
The salaried class will benefit if the Government re-looks at the above formula which provides little benefit to the salaried class who pays rent.
Reimbursement of Medical Expenses:
Considering the present cost of medical facilities and medicines, the exemption limit could be increased from the current limit of Rs 15,000. The DTC has proposed the limit to be increased to Rs 50,000. The exemption limit was increased from Rs 10,000 to Rs 15,000 by the Finance (No.2) Act, 1998.