The Union Budget for the FY 2013-14 will be presented before the Parliament on February 28 and the finance minister has promised many reformsexpected to combat inflation along with stable tax rates.
There may also be some changes in the tax slabs to provide some relief from the ever-growing inflation.
Here are a handful of the number of amendments expected and predicted by analysts in the Union Budget for2013-2014.
All those people who do not have their own house and stay in a rented accommodation or employees who do not get accommodation or house rent allowance from their employer enjoy a special tax deduction on the rent paid by them.
This deduction is allowed under section 80GG of the Income Tax Act in which an individual can avail 25 per cent deduction on the rent amount.
However, the limit is restricted to Rs 2,000 per month and has not changed for many years, which is now expected to change this year.
Moreover, under the Income Tax Act 1961, there exist 2 dissimilar sets of tax treatments with reference to rent free lodging provided by the employer.
While a government employee only pays the license fee, non-government sector employees who get rent-free lodging from their employees are taxed heavily at 7.5-15 per cent of the salary.
There is a necessity to maintain uniformity in taxes and a new system needs to be introduced offering equal rights to employees without discrimination.
Standard exemption should continue as in the past and should be given to all employees who are salaried, while the transport allowance deduction should increase.
Capital gain scheme
To save capital gain, an individual can invest in capital gain bonds according to section 54EC of the Income Tax Act.
The upper investment limit under this section is Rs 50 lakh (Rs 5 million).
In the past, there was no such cap and all transactions related to property were done with white money.
With the government making changes to this law few years ago and placing a limit, people have been resorting to unwanted ways to save tax.
This cap, hence, is expected to be removed in theforthcoming budget.
Rebate for senior citizens
The exemption limit for senior citizens over 80 years of age is Rs 500,000 per annum, which when compared to other taxpayers sounds reasonable.
However, in case of an income of more than the specified amount, they are required pay 20 per cent Income Tax on income up to Rs 10 lakhs (Rs 1 million).
Hence, the tax slabs
Leave Travel Assistance
Leave Travel Assistance is given to the employees by their employer on which employees avail a tax exemption twice in the span of four years.
This exemption is provided under the section 10(5) of the Income Tax Act, 1961.
The present rules provide that an employee can travel anywhere in the country along with their family; however, this travel exemption is not available for travelling abroad and neitherfor boarding and accommodation.
The law needs amendment as to make employees’ travel more enjoyable the exemption should not only cover travelling but lodging and boarding charges as well.
Also,instead of giving this concession twice every 4 years, it should begiven every year. Keeping in mind the kind of stress employees have to survive every day, the budget this year should include these amendments. Gift Tax
According to the prevalent section 64 of the Income Tax Act of 1961, when a person gifts his wife clubbing provisions apply and the wife’s income is either clubbed or combined with that of the husband.
This law needs to be amended now and at least allow a reasonable amount tobe given to a spouse without drawing provisions of section 64.
Goods and Service Tax
Amendments are proposed in the goods and services tax this year.
According to the finance minister if there is consensus among all states on the issue of GST, he will announce certain amendments which will tie all loose ends on GST.
Financial Exemption Limit
The financial limit i.e. the tax limit is increased once in a while by the finance minister.
However, it needs to be aligned according tothe increasing daily expenses.
If this part is taken into consideration then the exemption limit for every individual tax payer should be Rs 2,50,000 p.a.
A lower exemption limit leads to taxevasion and it has been observed earlier that tax collectionincreases with a reduction in the tax limit.
All these changes are expected to make way for economic reforms and boostthe country's slow economy.
What will happen eventually will unfold on February 28!