Every year people wish that budget brought some good news for them. Most
of the retail investors / individuals eye upon taxes and the
deductions, which help them to save some amount of tax. Over the years,
we have seen the amount available for deduction has remained the same.
My recommendations for this year’s budget would be:
Deductions under Chapter VI-A
Section 80C:The present deduction available under
Section 80C is upto Rs.1 lakh only. This limit is in force since 5-6
years. Considering the increasing inflation over the period, the limit
should be revised and increased. The expenses allowed for deductions
available under the section have also increased.
Principal amount of home loan and Stamp Duty charges:
We have seen real-estate prices have risen. Since the prices of
residential houses have increased, so has the amount of home loans
people are taking. So eventually, the principal amount, which is being
repaid, has also increased. Also the increasing stamp duty and
registration cost due to increase in real estate prices can be availed
for deduction.
Tuition fees:
The education cost is also increasing day-by-day. The people must
benefit from the deduction as the education expenses (school fees) for
their children is very high. So the available deduction under 80C must
increase.
Public Provident Fund:
Also, after increase in the limit in maximum amount of deposit in Public
Provident Fund (PPF) has increased to Rs.1 lakh and so has the current
rate of rate of interest to 8.80% p.a., conservative investors are
willing to invest more in PPF for taking the benefit by investing in
PPF.
Equity Linked Savings Scheme (ELSS):
With increasing financial literacy, investors have started investing in
mutual funds. ELSS was one of the routes and the reason people started
investing in mutual fund. Also the Nifty and Sensex
gave annual return of around 26% in calendar year 2012. So, this can
attract investors to invest in equity market. I feel instead of
continuing RGESS, if the deduction under 80C is increased, people may
invest more in ELSS funds, since ELSS is the only scheme u/s 80C which
has shortest lock-in period and can provide highest return in the long
term.
80CCF:
This section was introduced in the year 2001, which allowed a deduction
upto Rs.20, 000. The deduction was available for investment under
infrastructure bonds. The deduction was not available in the last
financial budget. Most of the retail investors used to invest in these
bonds for availing the deduction and as a fixed income investment. Also,
it was a great source for Infrastructure Company to raise funds, which
would help them to build better infrastructure of the country and which
would eventually benefit the growth of the country.
80CCG:
This section was introduced in the last financial budget, which allowed a
deduction upto Rs.25,000 for investments upto Rs.50,000 in specified
schemes or shares under the Rajiv Gandhi Equity Scheme. The motto of the
scheme was to pool investors to invest in equity market. This was not
very much successful due to the complication and eligibility criteria of
the scheme. So, instead of continuing this scheme and the deduction
amount under this scheme, it would be better to increase the deductible
amount under section 80C or bringing back section 80CCF.
So, if the tax deduction amount will increase, should increase looking
at the increasing expenses due to inflation. Lot of retail individual
taxpayers will wish to avail a higher deduction and save tax.
Published in: Moneycontrol.com
