Income tax filing troubles begin to haunt right at the beginning of the year. And at this time, we wish the Finance minister of India listens to our dream wishes in the coming budget.
Here is what you would be wishing he addresses in Budget 2016-17
The lowest income tax exemption slab is currently at Rs 2.5 lakh. So if my income is Rs.10 lakh per annum then my total taxable income is Rs 7.5 lakh. And i have to pay an income tax of Rs 1.25 lakh (10% on the Income tax slab of Rs.2.5 – 5 lakh and 20% on the balance 5 lakh). But if the minimum tax slab was doubled, then my total payable income tax is just Rs 50000. (The balance 5 lakh after exemption is taxed at 10%). Just this one move can save me up to Rs 75000.
Come January and I start scouting for options to save income tax. And when you talk of tax saving investments Sec 80C is the first thing that comes to mind – Life insurance premiums, PPF, ELSS, etc. all fall under Section 80C. But, the meagre limit of Rs 1.5 lakh is the maximum exemption I can earn under Section 80C. But with some benevolence on the part of the finance minister my income tax on a Rs 10 lakh salary would be reduced by a whopping Rs 30000. If the finance minister raises the 80C limit to 3 lakh I have to pay an income tax of Rs 65000 instead of Rs 95000 with the current norms.
Currently, only the interest earned on my savings account deposit is eligible for an income tax deduction. And that too up to a maximum Rs.10000. But the interest on my fixed deposit of Rs.1 lakh @7.5% is Rs.7500 which is taxed at marginal rate of tax. Since I fall in the 20% bracket I lose Rs 1,500 every year on just the interest. And with growinginflation the value of my interest earned on fixed deposit is far more reduced. If this interest earned on fixed deposits was tax free, they would seem more lucrative.