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

What is Electronic Clearing Service (ECS)?

  As the name suggests, it's an electronic process through which money can be transferred from one bank account to another. According to RBI, this mode is usually used for regular payments and receipts, like distribution of dividend, interest, salary, pension etc. This mode is also used for collection of bills for telephone, electricity, water, various types of taxes, payment of EMIs , investments in mutual funds , payment of insurance premium etc. There are two types of ECS , like most other banking transactions, ECS credit and ECS debit. An ECS credit is used by a bank account holder , usually a large company or an institution for services like payment of dividend, in terest, salary, pension etc. If your mutual fund pays you dividend to your bank account, of all probability it is being paid through ECS credit.ECS debit, on the other hand, is used when a company or an institution is getting money from a large number of people. For example if you are investing in a mutual fund sc...

WEALTH TAX

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300 WEALTH TAX   WHAT CONSTITUTES WEALTH? For wealth tax purposes, "wealth" means property , urban land, car, jewellery , yacht, boat, aircraft and cash in hand in excess of Rs 50,000. CAUTION POINT | Do not think you will have an easy escape from wealth tax by transferring your `wealth' without consideration to your spouse or minor child. Such assets will also be considered as your wealth. HOW TO DETERMINE YOUR TAXABLE WEALTH Add the taxable value of the above assets (computed as per the detailed rules for valuation) owned by you as on March 31 (for FY 2014-15, it will be March 31, 2015). In case you sold your car during the year, it will not be taxable wealth. Deduct loans if any obtained by you to acquire any of the taxable assets from the value of gross tax out for at least 300 days in a...

Equity Savings Fund

Invest Equity Savings Fund Online   The best part about these funds is that they are subject to equity fund taxation and at the same time are structured like MIP like funds . This new category, equity savings funds , offer a little of everything. They allocate money to equities & equity related instruments, and fixed income. They aim to generate returns by diversification. Such funds invest in fixed income and arbitrage to protect the investors from short term volatility and equity for capital gains. The best part of these funds is that they are subject to equity fund taxation and at the same time are structured like MIP funds.   MIP funds however are subject to debt fund taxation. Investors Equity savings funds are suitable for the following: First time investors who seek partial exposure to equity with less volatility and greater stability Investors seeking moderate capital appreciation with relatively lower risk Those wh...

How to Pick Top Performing Mutual Fund Schemes

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   How to Pick Performing Schemes  Funds that continue to stay in the top grade of performance over longer periods are the ones to bet on, advise investment experts   The mutual fund performance charts of the past few months make for an impressive reading. Funds across all categories boast of stellar returns. Sample this: The mid and small cap category has averaged 77 percent return over the past 12 months, with the best fund delivering a staggering 120 percent. The tax-saving funds also average an impressive 51 percent, including a fund which has soared 92 percent. Many of the table-toppers are funds of proven quality and track record. However, there are also schemes that are not that well-known. Some of these have rarely made it to the performance charts in the past, yet, of late, they bo...

8% Government of India Bonds quick guide

For those seeking comfort in safety of returns, the Government of India issued 8% savings bond once again comes to the fore. First launched in 2003, these bonds are issued by the government with a maturity of 6 years. The bonds are available at all times with specified distributors through whom you can apply to invest in them. Here is a quick guide to what the bond offers and its features to ascertain to check for suitability. What are Government of India bonds Government of India bonds are like any other government bonds with specified rate of interest. The rate is fixed at 8% per annum paid half yearly, or you can opt for cumulative payment of interest at the end of the tenure. You can buy these bonds from State Bank of India and its associates, other nationalized banks and some private sector banks such as HDFC Bank Ltd and ICICI Bank Ltd, among others. The bonds can be bought from the offices of Stock Holding Corporation of India as well. They are available in physical form onl...
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