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Budget 2013 Wishlist - Direct Tax

Shivanand Pandit 
on 19 January 2013


Honorable Finance Minister, could you please be our Santa?

Nation is gearing up for the Budget!

Expectantly this Budget is not just a twelve-monthly work-out but an endeavor to integrate the populace's visions. All the leading dailies are redden with industry leaders and business pundits rolling out list after list of what they expect the Finance Minister to deliver. Here are my brief propositions on Amendments in respect of a few provisions of Direct Tax Laws.

Bring Out Good news for salaried class

Exemption limit for Leave salary should be increased to 600,000 [Section 10(10AA)]

Exemption limit for Retrenchment Compensation should be increased to 600,000 [Section 10(10B)]

Exemption in respect of House rent Allowance (HRA) an amount equal to 50 per cent of salary to be allowed where residential house is situated anywhere in India. [Section 10(13A) Rule 2A]

Exemption limit for Children Education Allowance should be increased to Rs.2,000 per month per child up to a maximum of two children [Section 10(14)]

Exemption limit for Hostel expenditure Allowance should be increased to Rs.2,000 per month per child up to a maximum of two children [Section 10(14)]

Exemption limit for Transport allowance should be increased to Rs.2,000 per month [Section 10(14)]

Exemption limit for Medical Reimbursement should be increased to Rs.30,000 [Section 17(2)(v)]

Exemption limit for Medical Treatment outside India (subject to condition that gross total income does not exceed Rs 2,00,000) should be increased to Rs.400,000 [Section 17(2)(vi)]

Value of gift, voucher or token, as the case may be, up to Rs.10,000 in aggregate per annum would be exempt from considering as perquisite (Circular No.15/2001).

Interest-free/concessional loan should not be considered as taxable perquisite if aggregate amount of loan is below Rs.100,000 [Section 17]

Exempt commuted value received by an employee from the superannuation corpus standing to his credit at the time of resignation, to the extent the same is already taxed at the initial contribution stage under Section 17(2)(vii) [Section 10(13)]

Exempt Leave Travel Concession for Foreign Travel. Section 10(5) allows exemption for assistance or concession received from employer for employee and his family on leave to any place in India. There is no provision in the Act which covers the travel outside India.

Rationalize ensuing Provisions

Amount of deduction for expenditure on in-house research and development facility, if all conditions prescribed are complied with, then a sum equal to 100 per cent (presently it is 200 per cent) of the expenditure so incurred shall be allowed as deduction. [Section 35(2AB)]

The benefit of Section 35(2AB) should be extended for further period of 3 years i.e. up to 31st March, 2015.

Extend the due date from September 30 to October 15 of the assessment year for getting the books audited and submission of audit report. September 30 being the day for half yearly closing of accounts for banks generate dilemma as far as the payment of tax is concerned. [Section 44AB]

Provisions of Clubbing of Income should be applicable to the gifts made by a Hindu Undivided Family (HUF) to the wife, minor child, or daughter in law of any of its male or female members (including karta) and where the assessee withdraws funds lying in capital of the firm in which he is a partner and advances the same to his HUF which deposits the said funds back into firm, the said loan by the assessee to his HUF should be treated as transfer and income arising from such deposits should be assessed in the hands of the assessee.  [Section 64]

Deduction should be available in respect of repayment of principal amount towards settlement of loan taken for higher studies. This deduction is not available from the assessment year 2006-2007. [Section 80E]

The STT paid may be allowed as deduction by including it in the cost of acquisition and selling expenses under the Capital Gains. It will help in strengthen the capital market.

As per section 244A interest is computed @ 6% per annum on tax refunds payable by the Government however in cases of interest payable by the assessee to the Government, such as in section 234B, rate is 12% p.a. An identical form rate of interest of either 6% or 12% p.a. both for refunds and tax dues payable by the Government and assesses respectively may be prescribed.

The amount of Penalties as per Sections 271D and 271E should be evaluated and reduced to pragmatic levels. The penalty u/s 271D and 271E should be confined to maximum marginal rate of tax (say 30 %) instead of 100% of the amount of loan or deposit taken or refunded in violation of the provisions.

Flat levy of penalty of Rs.5,000 under section 271F irrespective of the income of the assessee or tax payable by him is not rational. It causes lot of burden on small taxpayers. Likewise the present penalty is not based on the period of delay. Therefore the penalty should be prescribed @ Rs. 300 per month of delay or 10% of tax payable whichever is higher (after deducting TDS and Advance Tax paid) by such assessee.

The surcharge and cess on corporate tax may be abolished. Further, corporate tax rate and the MAT rate may be brought down and tax rate applicable to foreign companies may also be relooked.

Bump up various monetary limits

Deduction in respect of Life Insurance premia, deferred annuity, contributions to provident fund etc. should be increased to Rs.200,000 [Section 80C]

Deduction in respect of subscription to Long term infrastructure bonds should be reintroduced and increased to Rs.60,000 [Section 80CCF]

Deduction in respect of Health Insurance premium should be increased to Rs.20,000 for self/ family and also upto Rs. 20,000/- for insurance in respect of parent/ parents of the assessee. [Section 80D]

Deduction in respect of interest on housing loan in case of self occupied property should be increased to Rs.300,000 [Section 24(b)]

Limit for Payment made otherwise than by account payee cheque should be increased to Rs.50,000 and Rs.100,000 in the case of payments made for plying, hiring or leasing buses {tour operators} in addition to goods carriages and the disallowance be restricted to 20% of the excess payment and not the entire payment. [Section 269SS] [Section 269T] [Section 40A(3)]

For Small scale industrialists it is very difficult to calculate/estimate the tax liability for whole year in September or December, because many times they get good business at the fag end of the year. Hence, their liability of advance, tax should have provision to pay by Mar.15 without and overdue Interest/Penalty and the threshold limit should be enhanced to Rs 30,000/ from the present value of Rs 10,000/-.[Section 234B]

Choice is yours, Mr. Finance Minister.          



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Shivanand Pandit 

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