Skip to main content

Tax Planning: Why some tax concessions make economic sense

 

THE Budget is around the corner and like every year, there is lot of expectations from all sections of the society to see that their demands are met in the Budget. It is pertinent to note that over the years, tax concessions — deductions/exemptions available to the individuals have been cut/reduced to bare minimum. In this context, there are a few tax concessions which have a strong case to be continued and even be enhanced in scope and quantum.

Housing Deductions

One of the popular deductions claimed by the individuals is in respect of the interest deduction on housing loan up to Rs 1.5 lakh for a self occupied property.
Similarly, a deduction of up to Rs 1 lakh could be claimed U/S 80C of the Income-Tax Act, 1961 (the Act), for repayment of the principal amount of the housing loan.


   The realty/housing sector provides employment to millions of people, including unskilled workers across the country. Further, a growth in the housing sector has a direct bearing on the cement and steel industry, which are the key industries for the overall development of the economy. Therefore, there is a strong case to continue and rather enhance the housing loan deductions to ensure that a demand-led pull factor from individuals provides the necessary stimulus to these key sectors. Therefore, it may be appropriate to increase the deduction for interest on housing loan interest to Rs 3 lakh and in respect of repayment of the principal amount to Rs 2 lakh.

Education Deduction

Currently, the deduction available in respect of expense incurred on education of children is clubbed with other investment-related deductions U/S 80C of the Act. Further, any specific education allowance if paid by the employer is exempt up to Rs 100 per month per child for a maximum of two children.


   Education is one of the key requirements of our country to grow and prosper. The very reason the government had levied education cess was primarily to collate and channelise funds for the education sector. It is imperative that education be encouraged by providing meaningful concessions/relief at the grass root level. In this context, a separate deduction for expenses incurred on education up to Rs 2,500 per month per child for a maximum of two children would make economic sense. In order to bring in economic parity, this deduction may be restricted to individuals having annual income of less than Rs 10 lakh.


   Further, instead of government subsidising schools and education institutions as at present, it is high time that the government empowers the individuals/parents to decide in which school/education institution their children should study. Therefore, education deduction, coupled with education vouchers, is probably the need of the hour.

Leave Travel Allowance (LTA)

Currently, a deduction is available for travel to any place in India for a maximum of two journeys in a block of four calendar years by economy class economy air fare/first class rail fare, etc.


   Travel and tourism is an important industry which has the potential to grow if necessary support is provided to this sector. Therefore, a simple measure of enlarging the scope of LTA provisions namely, allowing for deduction every year for journey to any place in India and not restricting the deduction to travel expenses alone but also to cover the hotel/guest house stay expenses could help provide the necessary stimulus to this sector.

A small step taken in the form of tax concessions at the micro level could help trigger the demand-led growth in the above sectors and could yield desired results at the macro level. Therefore, a few tax concessions, besides providing relief to the common tax payer, do make good economic sense!

 


Popular posts from this blog

Understanding Your Cibil Credit Information Report

   WE ARE all familiar with the anxiety and uncertainty that we feel when applying for a loan. After all, it's the lender who decides whether we can own our dream home, our first car, or whether our children can pursue higher education. In a nutshell, a better life depends on the lender's decisions.    While other factors do play a part in the lender's decision, the Cibil Credit Information Report ( CIR ) plays a crucial role in a lender's decision to approve a loan application.    Previously, lenders would treat all loan seekers equally. Each applicant, if approved by the lender's internal credit policy, would be charged at the same interest rate for a particular loan size and purpose. The lenders would charge a higher interest rate to all the borrowers, in order to compensate for the possible default of a small portion of the loan disbursed. In other words, it's like a professor (the lender) punishing an entire class (borrowers) for the mischief played b...

How much to invest in gold ?

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India) Let your motivation dictate the share of the yellow metal in your portfolio Enough has been said and written about gold as an investment option. The latest argument is that the craze for gold among Indian households is endangering our country's balance of payments. The policymakers are busy trying to find ways of discouraging investment in gold, but if households keep the common good in mind, they would be paying the market price for gas cylinders as they do for, say, their mobile phone bills. After all, private decisions are driven by private motives. So, how should a household look at gold from its own perspective? Gold is primarily acquired for its merit as a store of value. Even if the worst crisis hits a family, the gold that it holds could be put to use anywhere in th...

Compared to Bank FDs, Debt Mutual Funds are more Tax-Efficient

It is a security vis-a-vis returns battle between bank fixed deposits and debt funds In the past few months, banks have been consistently increasing their rates of interest on different fixed deposits. And after the Reserve Bank of India's Annual Monetary Policy, even the saving deposit rates are up at 4 per cent. For a six-month fixed deposit, you can easily get a rate of anywhere between 6 and 7 per cent annually. However, experts feel if one is looking to invest for less than a year, debt funds could make a better choice. The reason: Liquid funds and ultra short-term funds are giving annualised returns of 8 per cent. Financial advisors suggest retail investors opt for mutual fund schemes as they are more flexible and give higher post-tax returns. Opt for fixed deposits only if you are comfortable being locked-in for the tenure as a premature exit can attract a penalty. If your main aim is to ensure liquidity, debt funds are preferable. Though a fixed deposit gives you a...

Right Size your SIPs in terms of tenure and amount

Buy Gold Mutual Funds Invest Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Call 0 94 8300 8300 (India)    Systematic investment plans ( SIPs ) are here to stay. Going by the growing number of SIPs, it does look like investors have taken to them in a big way. Today as much as . 1,000 crore flow into SIPs every month. A SIP, as the name denotes, is a method to invest a fixed amount in a mutual fund at regular intervals --generally monthly or quarterly. It is easy to do and the minimum amount with most mutual funds is a mere . 1,000 per month. You can write post-dated cheques for your investment, or give an auto-debit facility from your bank account. In fact, most investors today prefer setting up an auto debit for their SIPs, since writing cheques is cumbersome. Also, you can choose any tenure that you want for your SIP — six months, one year, five years, 10 years or even opt for a perpetual SIP which will continue forever till you stop it....

Good Loan

Why Is It A Good Loan?: Loans against gold are cheaper and better than personal loans as the former are available at lower interest rates. In contrast, the interest rates on personal loans are not standardised and can vary from bank to bank. Also, a personal loan depends on a host of factors including, the borrower's salary, profession and the purpose for which the loan is being taken.      For instance, the interest rate on a personal loan of 5 lakh falls in a wide range of 15-30%. But loans against gold are available for as low as 11%. Secured borrowing such as a loan against gold, investments or property is cheaper because it is backed by some assets, which command a good value at any point of time. If the borrower defaults on the loan, the banks can liquidate the assets to settle the loan account.    Being a secured loan, the risk of default and credit losses is significantly lower in this loan compared to other forms of loan for personal use. Given the lower risk, gold loa...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now