Increase in minimum exemption limit
Due to demonetisation, the economy faced some initial hiccups which to some extent are somewhat visible now as well. Hence, it is expected that in order to provide some relief to instil more purchasing power in the hands of common people and small entrepreneurs, the minimum exemption limit may be increased from the current level of Rs 2.5 lakh to Rs 3 lakh per annum.
Standard deduction for salaried class
Salaried employees don't enjoy the degree of parity like businessmen, professionals or people having income from other sources like rentals, interest etc. so as to claim any expense related to their employment - be it expenditure for skill development. The salaried class enjoyed the benefit of standard deduction till AY 2005-06, before its withdrawal later; hence it should be restored to bring parity.
Despite the big rise in cost of Medical expenditure, the medical reimbursement limit of Rs 15,000 a year which was set in 1997 has seen no change so far. In order to align with increasing cost of medical expenditure, the government should increase medical reimbursement limit to Rs 50,000 p.a. from its current yearly limit of Rs 15,000 for salaried employees.
Tax deductions under Section 80C
Section 80C of the Income Tax Act is primarily an investment led tax avenue that helps in reducing one's tax liability. Further it helps in increasing savings of individuals that can help them meet their financial goals. The deduction limit was last raised in FY 2014-15 where it was increased from Rs 1 lakh to Rs 1.5 lakh per year. To encourage savings under various instruments mentioned therein like PPF, tax saving FDs etc., the limit can be increased to Rs 2 lakh.
Reduction of period of holding for investment based deductions for property
Under provisions like 54 and 54F, the investor in house property is required to hold the new residential property for three years for retaining the capital gain exemption for long term gains. This is an anomaly considering that the period of holding to adjudge long term capital gain has itself been reduced to two years. Hence, consequent amendment should be made in these provisions as well.
(Sandeep Sehgal is Director of Tax and Regulatory at Ashok Maheshwary & Associates LLP)
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