India's per capita income is estimated to increase by 5.4% to Rs 33540 in FY 2009-10 (at 2004-05 prices) from about 5.0% increase secured in FY 2008-09. At current prices, the per capita income is estimated to increase by 9.0% to Rs 43749 for FY 2009-10.
Meanwhile, the personal income tax collection has eased by 0.4% to Rs 83178 crore in the nine months ended December 2009. The collections are about 73.7% of the annual target of Rs 112850 crore budgeted for the current fiscal.
The budgeted personal income tax collections for the current fiscal is about 9% lower than the actual collections of Rs 123967 crore in FY 2008-09. It remains to be seen whether the country will end up collecting more than the target for the current fiscal.
The expectations from the Union Budget 2010 -2011 are as follows:
Considering the food inflation which has reached as high as 17-18% and to encourage more consumption and saving in the economy the personal income tax exemption limit should be further increased by Rs 50000 and slab limits should be revised accordingly. Currently, the threshold tax exemption limit for all assessees - for women is Rs 1,90,000, for senior citizen is Rs 2,40,000 and for others is Rs 1,60,000.
To encourage savings, the limit allowed u/s 80C to Individuals and HUF should be increased from Rs 100,000 to 200,000.
Standard deduction should be re-introduced for the salaried assesses as they are at a disadvantage with regards to claiming of expenses incurred in rendering the services against the assesses who carry on business or profession.
In order to enable employees to avail quality healthcare services the limit prescribed under section 17(2) of the Income tax Act for medical treatment should be raised to Rs 50,000. Further, to ensure better medical facilities for the growing population this deduction should be allowed to all section of the society including senior citizens whether employed or not. The prescribed diseases and ailments, which are covered under the Income Tax Act, need to be revised and the hospitals recognised by the Government need to be expanded.
The existing exemption limit in respect of conveyance allowance granted to the employee to meet his expenditure for the purpose of commuting between the place of his residence and the place of his duty is Rs 800 p.m. Keeping in mind the cost of commuting and running and maintenance of vehicles, the limit be increased to Rs 2000 p.m.
Tax benefit under section 80L relating to interest income from bank deposits should be re-introduced, with minimum limit up to Rs 25,000, which would lead, to increase in saving by individual assesses.
It is suggested that the limit for housing loan of Rs 250,000 (i.e. Rs 150,000 towards interest on loan and Rs 100,000) towards principal repayment) be increased to at least Rs 500,000 i.e. Rs 300,000 towards interest and Rs 200,000 towards principal loan repayment.
Further this limit of Rs 200,000 should be exclusively for repayment of principal on home loan as the present limit of Rs 100,000 u/s 80C, which includes principal home loan repayment is already overcrowded with other categories. This will encourage the people to have a house of their own.
Currently, there is ambiguity regarding determining whether a person's income should be taxed as business income or as income from investment. CBDT has given the assessing officer 15 points criteria to consider distinguishing a trader from an investor.
A huge majority of investors buy securities with the object of ultimately selling the same for profit at some stage and clearly this should not qualify them as "traders". Certain objective criteria of differentiating between the income of a trader and investor should be introduced. Most importantly, there should be no room for any assessing officer using discretionary powers, taking advantage of any subjectivity in any of the criterion.
The salaried class is seeking restoration of standard deduction, hike in threshold tax exemption limit and to increase tax breaks for interest payment and principal repayment of home loans, besides seeking hike in overall limit U/s 80 C.
Personal income tax collections are likely to surpass budget estimates. The need to channelise savings into productive investments is paramount considerations, but they have to be achieved without compromising on the tax collections too.