A vast majority of salaried class people employed in a host of trade and industry sectors want the Finance Minister Mr. P Chidambaram to raise the exemption limit of income tax to at least Rs 3 lakhs and increase deductions such as medical and educational allowances in the Union Budget so that they are left with more purchasing power, a comprehensive ASSOCHAM survey across major cities, found.
Over 89% of the respondent said that the slab of tax free income has not moved up in line with real inflation. The current basic exemption limit of Rs. 2,00,000 should be increased to at least Rs, 3,00,000 with the limit for women going upto Rs 3,50,000 Lakhs. This will increase the purchasing power of individuals and stimulate demand.
The month end will see finance minister P Chidambaram present his first budget since taking over from Pranab Mukherjee last year.
Consumer prices in India have been increasing by about 11% a year for the last 2-3 years. In other words, Rs 2 lakhs that is given as tax-free income can buy only 70% of what it could three years ago.
“Pushing the basic exemption limit the tax payers in saving taxes and will also align it with the proposals made by the Parliamentary standing committee on the Direct Taxes Code (DTC)”, said the survey conducted by industry chamer Assocham.
With increasing healthcare costs, the existing tax free limit of Rs. 15,000 should be increased to Rs. 50,000/-, the same also needs to be considered in the Budget, said 89% of the respondent.
The transportation allowance granted by the employer to his employee for commuting between the place of work and residence is tax-free to the extent of Rs. 800 per month. This limit was fixed more than a decade ago, and definitely needs to be revised upwards to at least Rs. 3,000 per month, given the rising commuting costs across the country, adds the survey.
“Additional benefits related to housing, the deduction limit for payment of interest (on self occupied property) has remained constant at Rs 1,50,000 since 2001. There is an increase in property prices and accordingly the amount of loan. An increase in the exemption limit to Rs 2,50,000 will be a welcome change”, reveals the ASSOCHAM survey.
“Section 80C of the IT Act provides a deduction of Rs 1,00,000 for certain investments. This provision helps people in making forced savings that helps them in the future. A common man expects this limit to be increased to Rs 2,00,000 with sub-limit of Rs. 50,000 exclusively for insurance and pension, adds Mr. D S Rawat Secretary General ASSOCHAM.
The survey was able to target employees from 18 broad sectors, with maximum share contributed by employees from IT/ITes sector (17 per cent). After IT/ITeS sector, contribution of the survey respondents from financial services is 11 per cent. Employees working in engineering and telecom sector contributed 9 per cent and 8 per cent respectively in the questionnaire.
Nearly 6 per cent of the employees belonged from market research/KPO and media background each. Management, FMCG and Infrastructure sector employees share is 5 per cent each, in the total survey. Respondents from power and real estate sector contributed 4 per cent each. Employees from education and food& beverages sector provided a share of 3 per cent each. Advertising, manufacturing and textiles employees offered a share of 2 per cent each in the survey results.
Around 55 per cent of the survey respondents fall under the age bracket of 25-29 years, followed by 30-39 years (26 per cent), 40-49 years (16 per cent), 50-59 years (2 per cent) and 60-65 years.
“Investments in infrastructure bonds are currently not allowed as a deduction up to Rs. 20,000. These bonds have proved to be quite popular and the limit should be increased to Rs. 50,000 and withdrawn must be restored, considering that the Government needs massive funds for the development of the infrastructure sector and also the lock in period be restricted to five years”, added 82% respondents.
Over 71% of the responded demanded for national pension system (NPS) brought under the EEE (exempt-exempt-exempt) as against EET (exempt-exempt-tax) at present. This means that investors get a tax exemption at all three stages of investment, appreciation and withdrawal.”
The survey was conducted in major places like Delhi-NCR, Mumbai, Kolkata, Chennai, Bangalore, Ahmedabad, Hyderabad, Pune, Chandigarh, Dehradun etc.. About 2,500 employees from the different sectors were covered by the survey from each city on an average.