Finance Minister Arun Jaitley should double the basic income tax exemption limit to Rs 5 lakh per year and raise the ceiling for claiming deduction under Section 80C to Rs 2.50 lakh, according to a survey by tax consultant Deloitte.
Almost all respondents want the I-T exemption limit to be raised substantially, while 58 per cent of the respondents were in favour of raising it to Rs 5 lakh.
“It will place more money in the hands of consumers resulting in increase in demand pick-up. Also, the increase in the slab limit will kick-start savings which will ultimately lead to increase in investment in the system,” stated a Pre-budget Expectations Survey Report by Deloitte.
It said that 71 per cent respondents want the limit of the Section 80C to be increased to Rs 2.50 lakh, from Rs 1.50 lakh.
“Given the increase in income levels and inflation, the existing limit is low. Increase in limit will help channelise household savings into productive avenues such as insurance, provident fund, equity and the like which will in turn help boost infrastructure spending and job creation,” the survey said.
To bring parity in the tax treatment of withdrawal from National Pension scheme (NPS) vis-a-vis provident fund, 88 per cent of the respondents demanded that withdrawal of NPS proceeds be fully exempted.
Currently, NPS is subject to income tax under the EET (Exempt Exempt Tax) regime — withdrawals from NPS are taxed to the extent of 60 per cent.
However, this is not in parity with other pension schemes such as provident fund, which is under the EEE regime.
“The government has positioned NPS as an alternative to PF. Therefore, to bring parity and incentivise employees to be part of NPS, it must be brought under the EEE regime,” the report added.
According to the Deloitte survey, the government has set an ambitious target to boost infrastructure spending and is in need of long-term funds. “Hence, it is an apt time to reintroduce deduction for investment in long-term infrastructure bonds as it will provide additional avenue for individuals to make investment and save taxes,” the survey suggested.