Tax benefits that the salaried class can expect from Budget 2016
Year after year, the salaried class hopes for a 'common-man friendly' Budget that might help manage household budgets, despite inflation.
- Feb 16, 2016,
- Updated Feb 17, 2016 7:38 PM IST
1. Restoration of the standard deduction from salary income: In comparison to an individual engaged in business/profession, a salaried individual is not entitled to deduction for legitimate expenses incurred by him/her in the course of performing his/her duties. For example, a practising chartered accountant (CA) is eligible to claim expenses incurred for his/her professional development (say, purchase of books, periodicals, attending seminars, etc.) while the same expenses incurred by a CA who is employed in a company is not eligible for deduction from his/her salary income.
In many advanced and developing countries like Malaysia, Indonesia, Germany, the UK, France, Japan, Thailand, etc. an allowance in the form of standard deduction is available for salaried employees for expenses connected with salary income. Given the rising prices and a need to bring in the necessary parity amongst individuals, the government may revive the standard deduction that was abolished in 2006.
2. Enhancement of few exemptions: Salaried individuals have high expectations for an increase in the exemption limits of various tax saving components, which become a part of their salaries and that have remained untouched since a long time, for an upward revision vis--vis the inflation levels. Here is a list of the common and important ones:
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3. Medical insurance: Budget 2015 had increased the deduction for medical insurance premium payments from Rs 15,000 per annum to Rs 25,000 per annum for non-senior citizens, while the limits went up from Rs 20,000 per annum to Rs 30,000 per annum for resident senior citizens (that is, individuals of 60 years but less than 80 years). However, healthcare costs as well as life expectancy are at an all-time high. The finance minister may consider to further enhance this deduction to Rs 30,000 per annum and Rs 40,000 per annum, respectively.
4. Deduction with respect to rent paid: In case of individuals who are not receiving House Rent Allowance (HRA) from their employers, a deduction of only up to Rs 2,000 per month is allowed with respect to rent paid towards accommodation occupied by them. However, this limit is due for revision since 1998. In light of the increased rental costs today, this limit is somewhat archaic and there is a case for enhancing it to Rs 10,000 per month. Separate limits for metro and non-metro cities may also be introduced.
Let us wait to read the fine print. Until then the countdown has begun.The author is Partner and Head Global Mobility Services, Tax, KPMG in India. The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or KPMG in India.
1. Restoration of the standard deduction from salary income: In comparison to an individual engaged in business/profession, a salaried individual is not entitled to deduction for legitimate expenses incurred by him/her in the course of performing his/her duties. For example, a practising chartered accountant (CA) is eligible to claim expenses incurred for his/her professional development (say, purchase of books, periodicals, attending seminars, etc.) while the same expenses incurred by a CA who is employed in a company is not eligible for deduction from his/her salary income.
In many advanced and developing countries like Malaysia, Indonesia, Germany, the UK, France, Japan, Thailand, etc. an allowance in the form of standard deduction is available for salaried employees for expenses connected with salary income. Given the rising prices and a need to bring in the necessary parity amongst individuals, the government may revive the standard deduction that was abolished in 2006.
2. Enhancement of few exemptions: Salaried individuals have high expectations for an increase in the exemption limits of various tax saving components, which become a part of their salaries and that have remained untouched since a long time, for an upward revision vis--vis the inflation levels. Here is a list of the common and important ones:
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3. Medical insurance: Budget 2015 had increased the deduction for medical insurance premium payments from Rs 15,000 per annum to Rs 25,000 per annum for non-senior citizens, while the limits went up from Rs 20,000 per annum to Rs 30,000 per annum for resident senior citizens (that is, individuals of 60 years but less than 80 years). However, healthcare costs as well as life expectancy are at an all-time high. The finance minister may consider to further enhance this deduction to Rs 30,000 per annum and Rs 40,000 per annum, respectively.
4. Deduction with respect to rent paid: In case of individuals who are not receiving House Rent Allowance (HRA) from their employers, a deduction of only up to Rs 2,000 per month is allowed with respect to rent paid towards accommodation occupied by them. However, this limit is due for revision since 1998. In light of the increased rental costs today, this limit is somewhat archaic and there is a case for enhancing it to Rs 10,000 per month. Separate limits for metro and non-metro cities may also be introduced.
Let us wait to read the fine print. Until then the countdown has begun.The author is Partner and Head Global Mobility Services, Tax, KPMG in India. The views and opinions expressed herein are those of the author and do not necessarily represent the views and opinions of KPMG International or KPMG in India.