As Finance Minister Mr Arun Jaitley begins engagements with stakeholders for the ensuing Budget for 2016-17, ASSOCHAM has recommended to the government to increase the deduction for long term savings to Rs 2.50 lakh.
Also re-introduce the concept of standard deductions for salaried employees who can then give a boost to consumption demand and boost economic growth.
In its pre-Budget memorandum to the Finance Ministry, the ASSOCHAM has also pitched for revision of the deduction of interest on housing loans to at least Rs three lakhs from the existing Rs two lakhs and a similar limit be set for principal loan repayment from Rs one lakh at present.
"Increase in the limit of the interest and principal repayment will give a boost to the real estate sector. Present limits are extremely low," the ASSOCHAM's comprehensive memorandum to the government said.
Similarly, explaining the rationale for its demand for standard deduction, it said, the salary of the employees has gone up moving along inflation and other cost factors.
"So in order to benefit the salaried employees the standard deductions should be reintroduced as one-third of salary or Rs 200000 whichever is less".
Likewise, in another measure to help the salaried earning tax-payers, the chamber has suggested a depreciation allowance for them in line with the professionals. "The deduction of depreciation is allowed under the head -Business and Profession.
No tax benefit is accrued to the salaried employees when they add assets. Though the assets get depreciated when owned by an employee, tax laws do not recognize this".
In another suggestion to help the salaried employees, the ASSOCHAM said the leave encashment exemption limit for tax calculation should be raised to Rs 10 lakhs.
"The current limit of Rs three lakh was notified by the CBDT way back in 1998 and needs to be raised substantially," the chamber President Mr Sunil Kanoria said.
Similarly, the monetary limits be re-fixed for HRA/transport allowance and children education. Expenses actually incurred in respect of these items have increased manifold in the past few years.
Children education allowance is presently exempt from tax up to Rs 100 per month per child for a maximum of two children.
It is suggested to increase this exemption limit to Rs 1,000 per month. Also, for the salaried employees, transport allowance is presently exempt from tax up to Rs 800 per month which should be raised to Rs 3,000 per month. "The limit for transport allowance was fixed in 1988-89. It needs to be revised due to the increased cost of transportation over the years".
The ASSOCHAM pre-Budget memorandum to the Finance Ministry also suggested that a provision may be made in the Income Tax Act that any expenditure incurred by an employees for education of under-privileged children by making payment directly to a recognised school should be allowed as deduction from salary income up to Rs 1,000 per month for maximum of two children.