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Dear Pranab Babu...

February 26, 2010 08:24 IST

Letter writingShubha Ojha, 48, an Amritsar-based homemaker is quite exasperated.

"Nowadays, we cannot even have a monthly budget. With prices of essential commodities like sugar and pulses rising, sometimes several times during the month, it upsets all our calculations," she said.

Worse still, Ojha's each visit to the grocery shop costs a minimum of Rs 500.

In the last few months, inflation has been rising consistently. While the wholesale price index rose by 8.56 per cent in December-end, the consumer price index went up by a whopping 14.97 per cent.

Obviously people are quite unhappy.

And Ojha isn't the only one. Mumbai-based homemaker Shakuntala Madiwal is worried that if the Kirit Parekh Committee's recommendations on fuel prices are implemented, her household budget will be hit quite badly.

In the run up to the Union Budget, a lot of individuals want to be heard. Sometimes, it is food prices. At other times, it is the demand for higher basic exemption limits by marginal taxpayers and investment issues.

For instance, the retired often feel the pinch of taxation because of an existing anomaly. That is, Senior Citizens Savings Schemes of banks, which offers a slightly higher rate of return, is sold at the age of 60.

But, they are taxed on the returns (if their income crosses Rs 2,40,000) because the Income Tax department defines senior citizens as someone who is 65 and above. Clearly, the higher rate of return does not help much.

Said Suresh Sadagopan, certified financial planner, "Even the basic exemption limit for senior citizens should be hiked from the existing Rs 2,40,000 to Rs 500,000. They have been paying taxes for their entire working life. A higher tax relief will be good for their finances."

Many also felt that the benefit of Rs 1,50,000 on home loan interest rate gets exhausted quite easily because of the high cost of real estate. In the metros, one can barely get a house for Rs 20 lakh (Rs 2 million).

"Nowadays, one is forced to take a higher amount as home loan, so the relief on interest payout is easily exhausted," said Gaurav Mashruwala.

Importantly, both expenses and investments are included under Section 80C.

The Rs l00,000 exemption has to be divided among expense for children's education, home loan principal payment and investment in instruments like National Savings Certificate, Public Provident Fund and Equity Linked Savings Schemes.

"The government can look at dividing the 80C instruments under two headsĀ -- investment and expenses and have separate limits for them," said another financial planner.

While Budget 2009-10 had enhanced the deduction under Section DD for severe ailments from Rs 75,000 to Rs 100,000, many felt that given the rising cost of healthcare, this is not enough.

Section 80 DD pertains to deductions for maintenance (including medical treatment) and rehabilitation of a handicapped dependent; or on the amount deposited under a scheme of Life Insurance Corporation and Unit Trust of India for maintenance of a handicapped person.

But this deduction is only for severe ailments like neurological disorders, AIDS, malignant cancer and chronic renal failure.

Of course, there are a whole lot of smaller issues that need to be addressed. For investments in fund of funds, while the investor is told that his/her money will be put in best performing equity funds, the taxation is as per debt funds -- the capital gains are taxed at 10 per cent with indexation and 20 per cent without indexation.

"For investors in equity fund of funds, it is important that they get the same tax benefits that are available for other equity schemes and stocks," said an industry player.

Joydeep Ghosh in Mumbai