The government should double the income tax limit for peak rate of 30 percent to Rs.20 lakh from the existing Rs.10 lakh, in order to provide more disposable income in the hands of common people for consumption spending, suggests industry chamber FICCI.
In its pre-budget memorandum to the government, the Federation of Indian Chambers of Commerce and Industry (FICCI) said the current peak rate of 30.9 percent, which include 0.9 percent education cess, on income of Rs.10 lakh and above casts a sizeable burden on the middle class, reducing the disposal surplus in their hands for consumption spending.
"It has, therefore, been suggested that the peak rate of 30 percent be made applicable to income over of Rs.20 lakh in the ensuing budget," said the industry body.
FICCI has also suggested that overall deduction limit under section 80C of the Income Tax Act be raised to at least Rs.2 lakh, with a view to boost investment and increase tax savings for individual.
Under section 80C of the Income Tax Act, certain investments like life insurance premium, children's tuition fee, provident funds, infrastructure bonds and equity linked saving schemes, of up Rs.1 lakh are exempted from taxation.
The chamber has demanded that the deduction limit for interest on housing loan should be increased. Currently, a deduction up to a maximum limit of Rs.1.5 lakh is available from taxable income towards interest on loan taken for acquisition/construction of self-occupied house property.
"With the property prices and interest rates rising steeply with each passing year, there is a need to revise the deduction limit to at least Rs.2.5 lakh per annum in harmony with the prevailing high interest rates," it said.
As a measure to index the amount to the current levels of inflation, FICCI has suggested that the exemption for payment of leave encashment be raised to Rs.10 lakh, from the current exemption limit of Rs.3 lakh for leave encashment paid to the employees at the time of retirement or otherwise.
Regarding deductions for educational expenditure, FICCI has recommended that the deductions for education should be de-linked from Section 80C and should be provided under a separate provision like Section 80D of the Act for medical insurance. Currently, tuition fee is eligible for deduction under section 80C of the Act.
The chamber has also suggested that the tax exemption limit on expenditure in medical treatment by employer be raised to Rs.50,000 per annum from the existing limit of Rs.15,000.
Currently, an amount of Rs.15,000 paid by the employer in respect of any expenditure incurred by any employee on the medical treatment of self/family is exempt from tax.
"The current tax exemption limit of Rs.15,000 per annum was fixed long ago and needs to be increased to at least Rs.50,000 per annum," FICCI said.