rediff.com

NewsApp (Free)

Read news as it happens
Download NewsApp

Available on  

Rediff News  All News 
Rediff.com  » Business » Here is what taxpayers want from the Budget

Here is what taxpayers want from the Budget

February 25, 2011 11:29 IST

While inflation is the main concern, taxpayers have many other demands from the finance minister.

Lata Harkare, a 62-year-old school teacher, has retired but is three years away from getting I-T benefits.

"The Income Tax (I-T) Act defines a senior citizen as someone who is 65 years and above, whereas the retirement age in the government and private-sector schools is 60 years. I still don't get the tax benefits that a senior citizen should enjoy," says Harkare.

There are many other such complaints the citizens have. The most common, obviously, is food prices.

The salaried class has several other demands too, like the taxation of perquisites such as employee stock options or Esops.

"At present, there is a double taxation on Esops. First, the difference between the market price and exercise price (notional price) is taxed as a perquisite. Further, it also attracts capital gains tax," says Dhaval Naik, an employee with an information technology company.

It implies that although the income is notional, there is a tax on it, according to financial advisor Sandeep Shanbhag.

The trouble: To bear the tax burden, employees have to borrow from their respective companies.

Many companies have a separate fund - a welfare fund or a trust - that lends to employees to meet this burden.

The tax benefit on interest payment on home loans - at just Rs 1.5 lakh - is no longer considered to be enough.

The interest benefits gets exhausted if one takes a loan of Rs 15-16 lakh. "The rise in the property prices in any metro and the tax exemption on interest rates is just not enough," says Biswajit Chatterjee, a senior manager with French pharma company, Vetoquinol. He wants the government to raise the deduction to at least Rs 3 lakh.

Chatterjee, 49, is also worried about the diminishing returns on tax-saving investment avenues for the senior citizens.

"Many retired people prefer keeping their money in fixed deposits (FDs) to keep their investments safe. But for ones in the highest tax bracket, returns of even 9.5 per cent translate into post-tax returns of just 6.5 per cent. In inflationary times, they are the worst hit," he says.

There are varied suggestions regarding making FDs a viable investment option for senior citizens.

Some like Sachin Deorukhakar, CFO of Aptivaa, a risk management consulting firm feels tax deductible at source (TDS) could be increased from Rs 10,000 to 50,000. Or, even make returns from FDs tax-free for senior citizens.

Given the rising healthcare costs, senior citizens say an increase in health-related rebates would help matters for them.

Then, a common grouse is the lack of quick redressal of litigation between tax payers and I-T authorities and speedy rectification of assessments (with TDS or erroneous tax credit).

Yes, as mentioned earlier, inflation is the most important concern. Any increase in the tax slab would be looked at as a balancing act - have more money in the hand to be able to spend more for the same basket of goods.

Tax experts do recognise that things aren't that simple. "Given that the government is fighting rising inflation and a growing fiscal deficit, it needs to improve its revenues. So, we could have more services included in the tax net. But tax slabs or (basic exemption limit) can be extended," says Vikas Vasal, executive director, KPMG.

 

Dipta Joshi in Mumbai
Source: