Finance Minister Nirmala Sitharaman will present the budget on February 1. Taxpayers have many expectations from this budget. This budget is even more significant as the coronavirus epidemic has a negative impact on employment and people’s income. The current deduction under Section 80C, 80C and 80CD (1) is set at Rs 1.50 lakh per annum as per Section 80CCE. The limit of Rs 1.50 lakh has been revised to Rs 1 lakh in 2014. 1 lakh limit was set in 2003. It has been 18 years since the original limit of 1 lakh was set. In 2014, it was increased by just over 50%, which is less than 3% annually. This annual average growth does not equal the average inflation over the same period. This should be reduced directly to at least Rs 2.50 lakh.
Tax provision for NPS withdrawal
Current tax law only allows withdrawals of up to 60% at the time of account closure. For dues, NPS customers are required to purchase an annuity. The point to note here is that the annuity is taxed as soon as it is received. Simply put, only 60% of the corpus is tax-free and will be subject to arrears in the future. Unlike NPS withdrawals, the accumulated balance in the Employees Provident Fund (EPF) is fully tax-free on time or on retirement.
If the government cannot tax the EPF by deducting up to 40% of the accumulated funds, such as the NPS, which the government tried a few years ago, the government will be able to bring equality to a minimum. Must try. The government should eliminate the need to buy an annuity with a 40% corpus and make a decision with consumers about where to invest the money.
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Rationalization of interest deduction for self-occupied property
Tax laws give you the benefit of interest on the amount borrowed for the purchase, construction and renovation of any home property. However in the total case of two self-occupied houses the amount of such claim is limited to 2 lakhs. Over the next 8 years, the Head House has been allowed to carry the balance without damages to maintain balance against losses under the property. Arguably the tax benefits should be made available to the full home interest of the actual home buyer. Not for those who own it and use it as an investment and do tax mediation.
(The author is a tax and investment expert. The opinions expressed by the author are personal.)