Note from Parizad Sirwalla - Budget 2016

Note from Parizad Sirwalla - Budget 2016

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note-parizad

Parizad Sirwalla
Head - Global Mobility Services
KPMG in India

 

Various initiatives launched by the Government of India such as ‘Make in India’, ‘Start Up India, Stand Up India’ and the likewise with an aim to promote economic growth, create employment opportunities, attract foreign investments, rural development, etc. have spurred positivity.

In this context, when the government presents its second full Budget on 29 February 2016, the common man is expecting some tax sops which shall help him plan his financial activities for the year.

Increase in basic income threshold:
A key expectation is an increase in the minimum threshold of income limit to INR300,000 per annum (p.a),that shall consequently result in an increase in income and purchasing power of the individuals to match rising inflation.

Further, in India the income trigger for peak tax rate of 30 per cent is INR10,00,000 p.a.; while in other countries such as the U.S., the U.K., etc. the income trigger is much higher. Hence, there is a need to further enhance the income level on which the peak rate triggers, to align with international standards.

Some expectations for the revised tax rates are as under:

 Income level (in lakhs)      Tax rates   
 0 to 3  Nil
 3 to 10  10%
 10 to 20  20%
 Beyond 20  30%

Allow greater deductions from taxable income:
In the most popular tax deduction Section 80C of the Income Tax Act, 1961 (the Act) such as life insurance premium, housing loan principal repayment, Equity Linked Savings Scheme (ELSS), specific fixed deposits, Public Provident Fund (PPF), National Saving Certificate (NSC), tuition fees, etc. These are therefore cluttered and are subject to an overall cap of INR150,000 p.a. While the limits were raised by INR50,000 p.a. last year, the government may consider enhancing the said limit to a minimum INR2,00,000 p.a. This could channelise savings into investments and promote economic growth.

Also the industry expects the time limit for a term deposit qualifying for the above deduction to be reduced to three years from five years so as to make it a more viable investment option, at par with other avenues such as bonds/mutual funds, etc.

Restoration of tax deduction towards investment in infrastructure bonds (earlier under Section 80 CCF of the Act) of INR20,000 p.a. could stimulate growth in the infrastructure sector. This deduction limit could be raised to INR50,000 p.a.

Expenditure allowable as exemption/deduction:
Increase in leave encashment exemption limit – The exemption limit towards leave encashment amount has not been increased since a long time. The exemption limit may be enhanced from INR300,000 to INR 5,00,000.

Increase in children education and hostel allowance exemption– These exemption limits were fixed decades ago. Hence, an upward revision upto INR500 p.m. and INR1500 p.m. respectively considering the rising cost of education is much awaited.

Deduction towards interest on housing loan: The limit for availing interest on a housing loan was enhanced last year to INR200,000 p.a., considering the rise in cost of construction, the limit may further be enhanced to minimum INR300,000 p.a.

Medical policy: The limits towards premium paid for a medical policy was increased last year. However considering the increasing medical costs and lack of comprehensive health system, the government could consider increasing these limits further.

Widen interest coverage: The deduction of INR10,000 p.a. is currently available only on interest on deposits in a saving account. This deduction may be widened to include interest on all types of deposits such as a recurring and term deposit. This shall promote savings and help boost growth of the economy as funds shall channelise into investments. Further, there could be an upward revision to the said deduction to a minimum limit of INR20,000 p.a.

Restoration - Standard deduction
The standard deduction which was meant to compensate the salaried class till the Financial Year 2004-05, could be reintroduced with a minimum limit of INR50,000 p.a. to ease the tax burden and improve the disposable income in the hands of the common man.

Among other reforms, we now await to see the Finance Minister unveil the changes on a personal tax front to keep the positive momentum alive in the common man.

The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG in India.

Various initiatives launched by the Government of India such as ‘Make in India’, ‘Start Up India, Stand Up India’ and the likewise with an aim to promote economic growth, create employment opportunities, attract foreign investments, rural development, etc. have spurred positivity.   

 

In this context, when the government presents its second full Budget on 29 February 2016, the common man is expecting some tax sops which shall help him plan his financial activities for the year.

 

Increase in basic income threshold:

A key expectation is an increase in the minimum threshold of income limit to INR300,000 per annum (p.a),that shall consequently result in an increase in income and purchasing power of the individuals to match rising inflation.  

 

Further, in India the income trigger for peak tax rate of 30 per cent is INR10,00,000 p.a.; while in other countries such as the U.S., the U.K., etc. the income trigger is much higher. Hence, there is a need to further enhance the income level on which the peak rate triggers, to align with international standards.  

Some expectations for the revised tax rates are as under: 

Various initiatives launched by the Government of India such as ‘Make in India’, ‘Start Up India, Stand Up India’ and the likewise with an aim to promote economic growth, create employment opportunities, attract foreign investments, rural development, etc. have spurred positivity.   

 

In this context, when the government presents its second full Budget on 29 February 2016, the common man is expecting some tax sops which shall help him plan his financial activities for the year.

 

Increase in basic income threshold:

A key expectation is an increase in the minimum threshold of income limit to INR300,000 per annum (p.a),that shall consequently result in an increase in income and purchasing power of the individuals to match rising inflation.  

 

Further, in India the income trigger for peak tax rate of 30 per cent is INR10,00,000 p.a.; while in other countries such as the U.S., the U.K., etc. the income trigger is much higher. Hence, there is a need to further enhance the income level on which the peak rate triggers, to align with international standards.  

Some expectations for the revised tax rates are as under: 

Various initiatives launched by the Government of India such as ‘Make in India’, ‘Start Up India, Stand Up India’ and the likewise with an aim to promote economic growth, create employment opportunities, attract foreign investments, rural development, etc. have spurred positivity.   

 

In this context, when the government presents its second full Budget on 29 February 2016, the common man is expecting some tax sops which shall help him plan his financial activities for the year.

 

Increase in basic income threshold:

A key expectation is an increase in the minimum threshold of income limit to INR300,000 per annum (p.a),that shall consequently result in an increase in income and purchasing power of the individuals to match rising inflation.  

 

Further, in India the income trigger for peak tax rate of 30 per cent is INR10,00,000 p.a.; while in other countries such as the U.S., the U.K., etc. the income trigger is much higher. Hence, there is a need to further enhance the income level on which the peak rate triggers, to align with international standards.  

Some expectations for the revised tax rates are as under: 

Various initiatives launched by the Government of India such as ‘Make in India’, ‘Start Up India, Stand Up India’ and the likewise with an aim to promote economic growth, create employment opportunities, attract foreign investments, rural development, etc. have spurred positivity.   

 

In this context, when the government presents its second full Budget on 29 February 2016, the common man is expecting some tax sops which shall help him plan his financial activities for the year.

 

Increase in basic income threshold:

A key expectation is an increase in the minimum threshold of income limit to INR300,000 per annum (p.a),that shall consequently result in an increase in income and purchasing power of the individuals to match rising inflation.  

 

Further, in India the income trigger for peak tax rate of 30 per cent is INR10,00,000 p.a.; while in other countries such as the U.S., the U.K., etc. the income trigger is much higher. Hence, there is a need to further enhance the income level on which the peak rate triggers, to align with international standards.  

Some expectations for the revised tax rates are as under: 

Various initiatives launched by the Government of India such as ‘Make in India’, ‘Start Up India, Stand Up India’ and the likewise with an aim to promote economic growth, create employment opportunities, attract foreign investments, rural development, etc. have spurred positivity.   

 

In this context, when the government presents its second full Budget on 29 February 2016, the common man is expecting some tax sops which shall help him plan his financial activities for the year.

 

Increase in basic income threshold:

A key expectation is an increase in the minimum threshold of income limit to INR300,000 per annum (p.a),that shall consequently result in an increase in income and purchasing power of the individuals to match rising inflation.  

 

Further, in India the income trigger for peak tax rate of 30 per cent is INR10,00,000 p.a.; while in other countries such as the U.S., the U.K., etc. the income trigger is much higher. Hence, there is a need to further enhance the income level on which the peak rate triggers, to align with international standards.  

Some expectations for the revised tax rates are as under: 

Various initiatives launched by the Government of India such as ‘Make in India’, ‘Start Up India, Stand Up India’ and the likewise with an aim to promote economic growth, create employment opportunities, attract foreign investments, rural development, etc. have spurred positivity.   

 

In this context, when the government presents its second full Budget on 29 February 2016, the common man is expecting some tax sops which shall help him plan his financial activities for the year.

 

Increase in basic income threshold:

A key expectation is an increase in the minimum threshold of income limit to INR300,000 per annum (p.a),that shall consequently result in an increase in income and purchasing power of the individuals to match rising inflation.  

 

Further, in India the income trigger for peak tax rate of 30 per cent is INR10,00,000 p.a.; while in other countries such as the U.S., the U.K., etc. the income trigger is much higher. Hence, there is a need to further enhance the income level on which the peak rate triggers, to align with international standards.  

Some expectations for the revised tax rates are as under: 

Various initiatives launched by the Government of India such as ‘Make in India’, ‘Start Up India, Stand Up India’ and the likewise with an aim to promote economic growth, create employment opportunities, attract foreign investments, rural development, etc. have spurred positivity.   

 

In this context, when the government presents its second full Budget on 29 February 2016, the common man is expecting some tax sops which shall help him plan his financial activities for the year.

 

Increase in basic income threshold:

A key expectation is an increase in the minimum threshold of income limit to INR300,000 per annum (p.a),that shall consequently result in an increase in income and purchasing power of the individuals to match rising inflation.  

 

Further, in India the income trigger for peak tax rate of 30 per cent is INR10,00,000 p.a.; while in other countries such as the U.S., the U.K., etc. the income trigger is much higher. Hence, there is a need to further enhance the income level on which the peak rate triggers, to align with international standards.  

Some expectations for the revised tax rates are as under: 

Various initiatives launched by the Government of India such as ‘Make in India’, ‘Start Up India, Stand Up India’ and the likewise with an aim to promote economic growth, create employment opportunities, attract foreign investments, rural development, etc. have spurred positivity.   

 

In this context, when the government presents its second full Budget on 29 February 2016, the common man is expecting some tax sops which shall help him plan his financial activities for the year.

 

Increase in basic income threshold:

A key expectation is an increase in the minimum threshold of income limit to INR300,000 per annum (p.a),that shall consequently result in an increase in income and purchasing power of the individuals to match rising inflation.  

 

Further, in India the income trigger for peak tax rate of 30 per cent is INR10,00,000 p.a.; while in other countries such as the U.S., the U.K., etc. the income trigger is much higher. Hence, there is a need to further enhance the income level on which the peak rate triggers, to align with international standards.  

Some expectations for the revised tax rates are as under: 

© 2016 KPMG, an Indian Registered Partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved.

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