The contribution to the New Pension Scheme (NPS) by a central government employee joining on or after January 1, 2004, enjoys a deduction of a maximum of 10 per cent of the salary of such employee. The contribution by the government as an employer is also allowed such deduction. Private-sector employees and consultants are also eligible for such deduction. It is now proposed that the threshold date of joining, i.e. January 1, 2004, is not applicable to private-sector employees.
There was a lot of confusion in the legal provisions regarding the applicability of the joining date of January 1, 2004, due to which many private-sector employees in employment before that date were not able to subscribe to the NPS. This much-needed clarity is expected to help the NPS take off in a meaningful way in the private sector as well. A limit of maximum deduction of Rs 1,00,000 has also been proposed. This limit will be part of the overall tax-saving cap of Rs 1,50,000.
In case of self-occupied house property, constructed by an individual through borrowed funds, interest payments are allowed to be deducted up to a maximum of Rs 1,50,000 while computing taxable income under the head 'income from house property'. In view of a rise in property prices and borrowing costs, this deduction has been raised to Rs 2,00,000.
Exemption from long-term capital gains tax is available where the sale proceeds of any long-term capital asset including a residential house are parked by an individual or a hindu undivided family (HUF) in a residential house. Lately, in many cases, sale proceeds have been deployed in purchasing more than one residential house and in some cases property has been purchased even outside India. Tax tribunals have pronounced various judgments, some of which have favoured the taxpayer on these accounts. However, negating all such avenues of tax planning, it is proposed that, henceforth, investment will need to be made in one residential house situated in India.
On indirect taxes, customs duty free baggage allowance is being increased from Rs 35,000 to Rs 45,000. Service tax remains unchanged at 12.36 per cent. There is usual re-adjustment of customs and excise duties on various items amenable to personal use.
The legislative process in relation to the Budget will be completed in next few weeks and the relaxations can be availed in relation to the current tax year 2014/15.
The new government didn't get much time in preparing this Budget and has done a decent job given the overall economic constraints. Improvement in taxpayer's services and treating the taxpayer as a customer rather than an adversary will go a long way in improving mutual trust and confidence as well as all important tax collection targets and voluntary compliance.
(The author is Chairman and Founder, J Sagar Associates. Views are personal)
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