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Thursday, February 28, 2013

Budget 2013: What the salaried class expect

As Finance Minister readies to present the last full budget of the UPA Government, investors wait with baited breath for tax reliefs which could provide some cheer and leave more money in their hands to beat inflation.

The expectations from the budget of the salaried class are...

Higher exemption Limit on Interest on Housing Loan

Even as real estate prices are soaring and interest rates continue to remain high the expense on housing loan interest on which there is a tax exemption continues to be pegged at a meagre Rs 1.5 lakh annually.

There is in fact a clear case for raising this limit to not only make housing more affordable but to also address the issue of piled up inventory in the residential segment as high property costs and interest rates have kept investors at bay from investing in real estate.

House Rent Allowance or HRA

The current provisions of the income tax act allow rent paid by the employee as an expense exempt from the income tax subject to a limit of...

50% of the annual basic salary (40% for non-metros) or

Actual HRA received from the employer or

Rent paid over and above 10% of the basic salary

(Lowest of the above three)

With soaring property prices and the rising cost of living, especially in the metros, rentals have also shot up sharply in the past few years, which the current exemption limits on rentals has failed to capture. Expectations are high that the finance minister may give due consideration to this long pending proposal of enhancing the limit of HRA exempt from tax.

Higher tax-free medical reimbursement

Any medical allowance given to an employee, by an employer, is tax-free in the hands of the employee to the tune of Rs 15,000 per annum. Considering the rising cost of medical expenses, the amount is too low and needs to be reconsidered

Widening the scope of section 80C

The total deductions that a taxpayer can avail on investments have been restricted to Rs 1 lakh for quite a while now. The section 80C basket even includes expenses such as eduction on children's education and tuition fees under its bandwidth and also repayment of interest loan that has severely limited the scope of deductions for taxpayers.

The finance minister may consider restricting Rs 1 lakh deduction under section 80C to core investments and allowing separate deduction for expenses incurred for basic needs like education and repayment of housing loan.
Source : The Economic Times, 28 Feb, 2013

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