Union budget is a first in many ways. One, it is coming up around a month earlier; secondly, it subsumes the railway budget; thirdly, it replaces the plan and non-plan components with the idea of capital and revenue expenditure; fourthly, it comes just before the leading tax reform in India’s history, i.e. the GST. And, finally, it comes after the biggest reform of the last 70 years, the demonetization of old currency notes.
The industry expectedly looks forward to Union Budget 2017-18.
Among other things, that include the rationalisation of levies and rolling out a raft of reforms to improve the ease of doing business and increase the global competitiveness of Indian industry, India Inc. is also eagerly awaits the rationalization of the personal income tax structure in India, revision of exemptions, and, broadening of the tax base.
“…We expect tax rationalisation and tax base reforms. We are hopeful that the minimum slab for paying income tax would be raised….”: Pankaj Patel, President, FICCI to the Telegraph
We, at FICCI, expect a major tax reform: one that rejigs demand generation by placing more money in to the hands of people. There is also a need to incentivize people who comply with the tax regime, which means that the upcoming budget eases out tax laws, and certain regulations. In this regard, FICCI has requested the finance minister to revise the current income tax slabs and bring them at par with international standards.
FICCI representation on Income Tax to finance ministry
Currently, the peak tax rate of 30% is made applicable over an income of Rs. 10 lakhs for individual taxpayers. However, the income level on which the peak rate is applied in other countries is significantly higher. This rate is also very high if we take in to consideration the rising inflation. Hence, there is a need for further raising the income level on which, the peak tax rate would trigger to make the same compatible with the international standards.
Revise the Personal Income Tax Slab Structure
To incentivise more people to come into the tax net and increase compliance, it is suggested that the Government should revise tax slabs for individuals in accordance with the following table:
|Slab (Rs. lakhs)||Proposed Tax rate|
Enhance the limit of various exemptions available to salaried taxpayers
The limit of exemptions towards various allowances presently prescribed under the Income Tax Law for computation of salary income was fixed long back. In the current state this is not in line with the inflation and the current costs incurred by the taxpayer.
Transport allowance exemption should be revised upwards to INR 3000 / month
The transport allowance granted by the employer to the employee to meet his expenditure for the purpose of commuting between the place of his residence and duty is currently tax exempt up to Rs. 1600 per month. The exemption limit is quite low considering the ever rising fuel costs and resultant conveyance costs. It is suggested that the exemption limit be considerably raised upwards, say to minimum of Rs. 3,000 per month to bring it in line with the rising conveyance costs.
Education allowance should be raised to 2500 / month
The education allowance granted by the employer to the employee to meet the cost of education expenditure up to two children is currently tax exempt up to Rs. 100 per month per child. This exemption limit was fixed in the year 2000 and seems extremely minimal considering the burgeoning cost of education. It is suggested that the exemption limit towards education allowance be raised at the very least to Rs. 2,500 per month to bring it in line with the rising inflation and cost of education.
Exemption limit on medical expenses should be raised to INR 50,000 / annum
Any sum paid by the employer in respect of any expenditure incurred by the employee on the medical treatment of self/ family is currently exempt from tax, to the extent of Rs. 15,000 per annum. This limit was last revised long back and needs to be revisited in light of the rising medical costs. It is suggested that the current tax exemption limit of Rs. 15,000 per annum be increased to at least Rs. 50,000 per annum.
We, at FICCI, support and believe in the long term vision of our government in strengthening our economy. We steadfastly remain in support of the various initiatives taken by our government in anchoring India strongly on the global map. We’re obliged that several of our suggestions in this regard were favorably considered by the government. We do hope that the Government will positively consider our submissions on rationalizing the personal income tax law, which indeed will bring fairness and equity into our tax system.