2018 Pre-Budget Analysis: May Surprise or Shock you

“The Budget Day” i.e. 1st February is one of the most important date for every person from the financial perspective. Every single Indian has their own personal expectations from the union budget which is presented every year. For some people, a good budget means an increase in 80C limits, for other people, it is increasing in government expenditure on child and women welfare and for some others, it could range from steps to curb inflation to personal increase in tax slabs.

This is the last full budget of the Modi Government so the hopes are high of the entire country from the Budget 2018!

At Tax2win we have been following The Budget 2018 very closely. Our team of expert CA’s have done an in-depth research for the expectations from the budget for an individual.

Before the budget 2018, we are here with in-depth coverage of expectations from the budget supported by the reasoning and practical problems faced by the people with the complete understanding of the existing provisions, faced by the taxpayers in our country.

1. Increase in Basic Exemption Limit :

• Meaning: The basic exemption limit is the threshold amount up-to which a person is not liable to pay income tax on his total income.It has been categorized in law as per your age. Like below 60 years, 60 – 80 years and more than 80 years.
• Existing: Currently, for individuals (i.e. below 60 years of age) the basic exemption limit has been fixed at Rs. 2,50,000. For Senior citizens (60 years to below 80 years), it is Rs.3,00,000 and for Very Senior Citizens(80 years and above), it is Rs. 5,00,000. Further, for both men and women, this limit is at par.
• Issue: The current exemption limit has not been changed since budget 2014 and since then in comparison to the rate of inflation, the exemption limit remains at an unsatisfactory level. With this limit, it is insufficient for the common man to meet his standard of living consequently it should be increased to at least Rs 3 lakh. Additionally, after implementation of 7th Pay Commission, there has been a considerable rise in the personal disposable income of people and accordingly, the basic exemption limit needs to be raised by at least Rs. 50,000.
• Our expectations: We expect that it would be surely increased to provide relief to the lower income group.If this happens, it would truly be a great news for the small taxpayers, leaving them with more money for savings and investments.This move will impact the government in a positive way and motivate the people.However, in order to counterbalance the loss from raising the exemption limit, the government may increase the surcharge to charge more tax from the higher section of society.
  Further, when Modi government presented its first budget in its present term, it came up with the increase in the exemption limit. Now, since this is the last full Budget of the Modi Govt. so we can expect the same from the political point of view.
  To reduce the common man’s distress and minimize the impact of demonetization and GST on day-to-day lives, there is a dire need for this step.

2. Income Tax Slab Rate relief:

• Meaning: The Slab Rate means the rate at which tax would be levied on the total income as per the various specified income tax slabs. This rate would depend upon the tax slab in which you fall.
• Existing: Currently, for the purpose of levy of the tax, three rates have been specified by the government. If your income is up to 2.5 lakhs then you don’t have to pay any tax. If your income falls in the slab 2.5 lakhs to 5 lakhs then tax is levied at 5%. But if your income is above 5 lakhs but limited to 10 lakhs then tax is levied at 20%. Further, if your income is above 10 lakhs then tax is levied at 30%.
• Issue: The wide gap of the tax rate from 5% to directly 20% should be narrowed. This gap results in undue hardship on the middleman whose income ranges from 5 lakhs to 10 lakhs. People will be contented if something is done for slab rates like starting it from 5%, 10%, and ranging to 15%, 20%, 25% i.e.difference of 5% may be kept amongst the various slabs and inclusion of more slabs of income.
• Our expectations: We expect that some relief may be provided to narrow down the tax rate gap in the upcoming budget. It may be possible that Mr. Arun Jaitley may think of changing the tax rates while keeping the basic exemption limit of Rs 2.5 lakh intact. This would help the government to achieve the twin objective of reducing the tax burden while ensuring the increment in the total tax base.

3. Increase in Tax Slabs:

• Meaning: The income tax slab means the range which the government has specified for levying an income tax. There are various Income Tax slabs (ranges) for different categories of taxpayers.
• Existing: Currently, four tax slab have been declared by the government according to which tax is levied on an individual. These are – below 2.5 lakhs, between 2.5 lakhs to 5 lakhs, between 5 lakhs to 10 lakhs and above 10 lakhs.
• Issue: The topmost income tax slab having the tax rate as 30% should be raised from the current Rs 10 lakh to Rs. 25 lakhs as considering the inflation and growth rate of the economy.
• Our expectations: To promote tax base increment, some sort of slab rearrangement should have to be resorted.Even in the DTC, the topmost slab has been proposed as Rs. 25 lakhs in a phased manner.From this move, it can be clearly concluded that even government has considered that limit of 10 Lakh as obsolete. It might be possible that instead of changing basic exemption limit or tax rate, the government may come up with the change in slab range.

4. Increase in the limit of section 80C:

• Meaning: If your expenditure or investments fall under the category mentioned under this section, then you don’t need to pay tax up to the limit specified.It allows you to save tax by making investments/expenditures under the various specified avenues.
• Existing: Currently, the deduction under section 80C is available maximum up to Rs. 150,000/-. The Eligible investments include life insurance, equity-linked savings schemes (ELSS), Public Provident Fund (PPF), National Savings Certificate (NSC), five-year notified tax-saving bank deposits, five-year post office time deposits and many more. One can invest the entire amount of Rs 1.5 lakh in one investment or across more than one.
• Issue: Practically, the overall cap of Rs. 1,50,000 does not offer any meaningful benefit with multiple investments clubbed under one single provision. The overall limit of Rs. 150,000/- provided under this section seems to be insufficient. This limit gets exhausted in just one or two investment avenues and then the common man ends up paying taxes on his rest of the investments. This results in the habits of saving only up to Rs. 1,50,000.
  For a taxpayer who is paying children’s tuition fees and equated monthly installments (EMI)s on a home loan then considering the inflation factor the cap of Rs 1.5 lakh under this section is not enough.
  Even individuals with high salary feel like they have been handcuffed by the government as a major portion of section 80C gets exhausted by the EPF contributions itself. If the section 80C limit is increased from Rs 1.5 lakh to say, Rs. 2 lakh, the additional tax saved will be Rs 2,575, Rs 10,300 and Rs 15,450 for those in the 5, 20 and 30 percent tax bracket, respectively.
• Our expectations: We expect Budget 2018 to increase the Section 80C limit from Rs 1.5 lakh to Rs 2 lakh. The increase in Section 80C limit will allow individuals to save more. Further, Finance Minister Arun Jaitley had raised the exemption limit by Rs 50,000 to Rs 1.5 lakh when he presented the first budget of Modi Government.So, looking at the need and political benefit, there are chances that they again give relief in this respect as this is the last full-fledged budget.
  However, it may be possible that the increase may be restricted to one or two specific tax-saving products within the section 80C basket.

5. Standard Deduction for Salaried Employees:

• Meaning: Standard deduction means a flat deduction from the salary income to make up for the expenses which an employee typically incurs in relation to his employment.
• Existing: In India, this deduction has been withdrawn from the Financial year 2005-06. It last existed during the financial year 2004-05 wherein a salaried employee can claim a flat deduction from his or her salary income of 30,000 or 40% of salary (if the salary did not exceed 5 Lakhs), or a deduction of 20,000 (if the salary exceeds Rs. 5 Lakhs)
• Issue: There are various expenses that an employee incurs during the course of his employment for which no deduction is available to him. So there must be some additional deduction available explicitly against salary income like the standard deduction.Unlike self-employed individuals (be it business persons or professionals), salaried employees only enjoy a few tax-free allowances, the quantum of which has clearly not kept in line with inflation. For instance, a small tax exemption of Rs. 1,600 per month is available for transport allowance paid for commuting to and from between home and office.
  In many countries like Malaysia, Indonesia, Germany, France, Japan, Thailand, etc, allowance in the form of standard deduction is available for the salaried employees.
• Our expectations: The salaried class has always been proactive in contributing to the direct tax collection. As per the statistics, it has been noticed that the maximum number of returns filed are in the Form ITR 1, which is generally used by salaried and pensioners. Thus, Government may allow some additional benefits to the salaried taxpayers by re-introducing the standard deductions or make such similar provisions in the upcoming budget.

6. Pro rata allotment in sec 80D:

• Meaning: Section 80D deals with the tax deduction on the medical insurance and preventive health checkup. An individual can avail tax deduction for a medical insurance policy for self, family members (spouse, children) and his parents under this section.
• Existing: If you or any of the family members or your parents are below the age of 60 years then maximum deduction of Rs.25,000 per year [separately for the policy of you / your family and policy of your parents]. But if you or any of the family members or your parents are above the age of 60 years then maximum deduction of Rs.30,000 per year. Further, A deduction of Rs.5,000 can be claimed every year on expenses related to health check-ups which are included in the above-said limits of Rs. 25000 or 30000 as the case may be.
• Issue: As per the current practice, the deduction of the medical insurance premium is allowed in the year in which the payment is being made. However, there are many medical insurance policies existing in the market for which a single premium is payable but the policy cover is for more than one year. These policies are more economical compared to traditional yearly policies so people are inclining more towards them.
• Our expectations: In such case, Pro-rata deduction of single premium paid in year one should be allowed over the term of the policy instead of single year deduction. For instance, if the premium paid is Rs.75,000/- for a 3-year policy, Rs.25,000/- should be allowed as the deduction each year starting from the year in which the payment has been made.
  Hence as per the current scenario, the need to incorporate a separate provision for policies having the term of more than one year in section 80D should be understood and upheld in the budget 2018.

7. The inclusion of Term Deposit in Sec 80TTA :

• Meaning: Section 80TTA provides a deduction to an Individual and HUF in respect of interest income from savings account held with Bank or Banking Company or Co-operative society carrying on the banking business or Post office.
• Existing: The quantum of deduction allowed under this section is Rs. 10,000 or the actual interest earned, whichever is lower. If interest earned is more than Rs. 10,000 then balance amount will be taxable as the Income from Other Sources.
• Issue: This deduction is not allowed on interest earned on term deposits. Term deposits means deposits repayable on expiry of fixed periods. It includes fixed deposit, recurring deposits etc. Now, if we talk from the perspective of a common man, then it is quite obvious that people are more interested to keep their money in banks in the form of FD or other term deposits due to higher returns. So, the purpose of this section is being defeated to an extent, people keep the money in banks only, but in the different form i.e. less amount in savings and more in FD.
• Our expectations: Therefore, the scope of this section should be widened and include time deposits so as to rationalize the effect of the provision.

8. Increase in Medical Allowance Limit:

• Meaning: As per this allowance, employer reimburses health expenses incurred by the employee to a certain limit and hence it is a part of the CTC of the employee.
• Existing: Income Tax Act allows tax exemption up to Rs. 15,000/- on medical expense reimbursements did by the employer.
• Issue: Every employee incurs medical expenses for himself and his family. At present, the limit for medical reimbursements for not being taxed is Rs. 15,000. This limit for reimbursement of medical expenditure was last revised almost 14 years ago and in light of the so high medical and hospitalization costs, it needs to be reconsidered.
• Our expectations: Keeping in view the increased medical treatment and medicine cost, it is necessary to increase the exemption limit of medical reimbursement, which will somehow reduce the burden of the employee. Hence, the current limit of Rs. 15,000 per annum should be increased to at least Rs. 30,000 per annum.

9. Increase in Deduction for medical treatment of specified disease:

• Meaning: This deduction is allowed to Individual and HUF on the expenditure incurred on the medical treatment of a dependent person for the disease specified in Rule 11DD.
• Existing: As per the existing law, for the person below the age of 60 years, the deduction Rs. 40,000/- or amount actually paid, for the senior citizen the deduction is Rs 60,000 or amount actually paid, for very senior citizens it is Rs 80,000 or amount actually paid, whichever is less, can be claimed.
• Issue: This deduction deals with the very serious kind of diseases like Neurological Diseases, Hematological disorders, Malignant Cancers etc. The expenditure on medical treatment on such kind of diseases is obviously very high as compared to the existing limit specified by the govt. The person suffering from these specified diseases is already stressed by the huge amount of hospital bills and then sliced on the cake is done by the tax department.
• Our expectations: We expect that the limit should be increased for all the three categories namely, for the person below the age of 60 years, the deduction should be at least Rs. 1,00,000/-, for the senior citizen the deduction should be at least Rs 1,50,000, for very senior citizens it should be at least Rs 2,00,000 or amount actually paid, whichever is less.

10. Increase in Interest on Self Occupied House:

• Meaning: If a house property has been acquired, constructed with borrowed capital then interest paid on such borrowed amount is allowable as a deduction under section 24.
• Existing: Currently, the maximum deduction for interest on home loan allowed is up to Rs.2,00,000 in case of self-acquired property and for let out property, interest is allowed without any limit [however, this is subject to set off limit of Rs. 2 lakh].
• Issue: Housing for all’ has always been at the top of the agenda of every government. When an amount is borrowed for the purchase of the house , then initially the interest component is very high as compared to the principal amount. The existing limit does not provide sufficient relief to the home buyers.
• Our expectations: We expect that for promoting the housing sector, Modi government should increase the threshold limit up to Rs. 2,50,000 for the amount borrowed for acquisition, construction in case of self-occupied.

11.Raise in Term of Education loan :

• Meaning: When any loan is availed by an individual from any financial institution for his higher education and for the higher education of his relative then the deduction for interest is provided.
• Existing: Currently, 100% of the amount of interest on such loan is allowable as a deduction for the eight assessment years or until the interest is paid by the assessee in full, whichever is earlier.
• Issue: Deduction under this section is allowed only up to eight assessment years and as per the current scenario this period is very less. If we talk about a loan for higher expensive education like MBA or Medical etc. then a layman would also feel that provision needs reconsideration. There is no sense in limiting the period. Until the time assessee repays the amount, he should be eligible to avail the deduction based on the available proofs. Actually, this deduction should be available as a deduction for home loan i.e. without any time period.
• Our expectations: We are expecting that for providing the benefit to youth for higher education, the period for deduction should be increased in the budget 2018 and interest should be allowed for at least 15 years.

12.Increase in Rent paid deduction:

• Meaning: Section 80GG allows a deduction to individuals in respect of house rent paid. However, this deduction is allowed only in the case when an individual is not receiving house rent allowance (HRA) from the employer.
• Existing: Currently the lower of the three shall be allowed as a deduction for rent paid:
  1. Rent paid less 10 percent of the adjusted total income
  2. Rs 5,000 per month
  3. 25 percent of the adjusted total income
• Issue: Section 80GG was inserted keeping in view both salaried (not receiving HRA)and self-employed. The purpose of the section was to provide tax benefit on the rent amount paid.Today even in non-metro cities, the rent rates are very high and the current limit is not able to provide a relief.The maximum deduction which can be allowed to the user under this section is only Rs. 60,000/- which is very low as compared to annual rent paid by an individual.
• Our expectations: We are expecting that limit should be increased to at least Rs.8,000/- per month for non-metro and Rs. 12,000 for metro so that compensation for HRA can be provided to an individual in a real sense.

13. Additional Deduction for Interest on a home loan:

• Meaning: For the first time home buyers, section 80EE was inserted in F.Y 16-17 for providing the benefit to Individual/ HUF.
• Existing: Individuals who took loan during FY 2016-17 were allowed to take benefit of additional interest up to Rs 50,000 under Section 80EE of the Income Tax Act, subject to certain conditions. The deduction is over and above the section 24(b) i.e. the limit of Rs. 2 lakh.
• Issue: This deduction was a boon for the first time home buyers but it existed only for a limited time period i.e. loan should have been availed in F.Y 16-17 only. If the loan has been availed in FY 2017-18 then this benefit is not available. For the loan taken during F.Y 16-17, the deduction can be availed in the subsequent years.Still, many people are struggling to own a house of their own so this deduction should be reintroduced.
• Our expectations: We expect that with the government’s push on the housing front there could be re-introduction of incentives like sec 80EE for first home buyers. Therefore, this benefit could be reintroduced in FY 2018-19 may be with modifications.

14.Bitcoin Taxation:

• Meaning: Bitcoin, was the first decentralized cryptocurrency created in 2009. Since then, numerous other cryptocurrencies have been created as well as different trading softwares and apps that can help people invest in crypto. You might want to take a look at bei Bitcoin Up if you’re interested in this. Cryptocurrency is digital money which uses the technique of cryptography and works as a medium of exchange. Bitcoin derives its value on the basis of undisclosed algorithm i.e. without any underlying asset.
• Existing: Currently no clear set of rules, regulations or guidelines have been laid down in this respect. At present, there is no clarity on taxation of BITCOINS as it has not specifically covered under the Income Tax Act, 1961. Recently, a committee under the chairmanship of secretary, department of economic affairs, is deliberating over all issues related to cryptocurrencies to propose specific actions to be taken.
• Issue: India accounts for more than 11 percent of such trade globally and currently there is no clarity over the taxation aspect, so there is an indispensable need for the law enforcement agencies, tax authorities and legal regulators to understand the concept of bitcoin soon and where exactly do they fit in existing regulations and legal frameworks.
• Our expectations: We cannot say that BITCOINS are illegal since till now, there is no ban on BITCOINS in India. However, at present it is unregulated and also it is not covered within the meaning of currency of legal tender in India. But yes, as cryptocurrencies are becoming more and more mainstream, very soon we can expect some clarification on this issue by the government either by the way of inclusion of this aspect in the coming budget or by the way of separate notification.

15.Expectations of home buyers for principal repayment of housing loan:

• Meaning: If any amount is borrowed for purchasing the home then the principal amount is allowed as a deduction under section 80C.
• Existing: As per the existing position, principal repayment of home loan is allowed under section 80C up to 1,50,000/-
• Issue: Under section 80C, the overall limit is 1,50,000 and practically, when a person invests in one or two options in that itself, the limit gets exhausted. And apart from the investments, when the principal component of the loan availed starts rising in the last years of the loan then comes the actual problem. As a result, a person ends up paying a huge amount of taxes. Having one’s own home is a dream of every individual but with kind of fewer tax benefits, its difficult to turn the dream into reality.
• Our expectations: In order to promote housing sector, we are of the view that Govt should provide the additional benefit of the deduction for principal repayment of housing loan apart from deduction 80C. It may be provided by the introduction of the new section specifically for principal repayment of a home loan or some other way can resort so that people will not afraid of availing loan and own their house.

16. Simplified National Pension System:

• Meaning: If an individual contributes to NPS then he is eligible for deduction under section 80CCD(1), 80CCD(1B).As per section 80CCD(1), the limit of Rs. 1,50,000 is allowed and as per sec 80CCD(1B) Rs. 50,000 can be claimed. So, overall Rs. 2,00,000 can be claimed.
• Existing: At the time of withdrawal i.e. on retirement, minimum 40% is to be used for purchasing an annuity plan and rest 60% of withdrawal amount is partly taxable in the year of withdrawal at the tax rate of that particular F.Y. Further, now the govt has allowed withdrawing before retirement up to 25% from NPS account.
• Issue: NPS is opted by many Individuals for their retirement but it is not fulfilling its purpose. People are facing the problem at the time of retirement, whether to withdrawal whole 60% or not, as there will be huge amount accumulated in NPS account and withdrawal of same will lead them to the tax bracket of 30%. Thus, it’s complexities should be removed, thereby making NPS simple and easy to understand, invest and withdraw.
• Our expectations: We expect that withdrawal amount on retirement must be made tax free by the Government. This will enhance the fund size of the NPS as user will opt this option more due to the simple and tax-free investment.

17.Relief under Sec 44ADA:

• Meaning: To give relief to small taxpayers from the tedious work of maintaining books of account, the Income-tax Act has framed the presumptive taxation scheme under sections 44ADA for Professionals like the 44AD for businesses.
• Existing: If the Gross Receipts from a profession does not exceed fifty lakh rupees then a sum equal to 50% or more of the total gross receipts of the assessee in the previous year on account of such profession shall be deemed to be the profits and gains of such profession which would be accounted under the head “Profits and gains of business or profession”.
• Issue: A person opting section 44ADA has to offer minimum 50% of his gross receipts for tax. Practically, It has been observed that people are not able to earn 50% as profit due to expenses. The rate of 50% appears to be on the higher side and may cause high tax incidence on such professionals particularly since the scheme is intended to cover professionals with low gross receipts/total turnover resulting in low margins due to nature of work and high competition. This high rate may cause a lot of professionals not to opt for this scheme thereby defeating the ultimate objective of introducing this provision.Some sort of relief in the form of digital transaction or some other mode should be provided in that case.
• Our expectations: As lower minimum profit is given under section 44AD in case of digital transactions. So, we expect the same kind of provision for section 44ADA, that if the transaction is made digitally then minimum profit will be around 40% as compared to 50% as of now. Also, the Income Tax Simplification Committee headed by Justice R V Easwar has recommended the rate of 33.33% of the receipts as the income from profession.

18. Increase in Children Education & Hostel Allowance:

• Meaning: Allowances included as part of the CTC are either fully tax-exempt or exempt up to certain limits.The Children Education Allowance is provided to the employee for meeting the cost of education of his/her children.
• Existing: Currently, the amount exempt under children education allowance is Rs. 100 per month per child. Same is the case of Hostel Allowance, just the amount is altered to Rs. 300 per month per child. Further, both these allowances are allowed for maximum 2 children.
• Issue: For both of these allowances, the limits for exemption were decided a long time back and since then there has been no revision in them as per the current scenario. Considering the inflation and cost of living, these allowances definitely require a relook in the Union Budget 2018. Leaving aside the private education, even in the government schools or colleges, it is difficult to find the cost of education as Rs. 100 and cost of the hostel as Rs. 300 per month. Therefore, these existing obsolete limits must be altered.
• Our expectations: We expect that considering the current cost of education, the existing limits are far below and there is an immediate need for revision in these amounts to at least Rs 1,500 to Rs 3,000 per month per child so that the salaried person can be benefited with tax provision in the real sense.

19. Raise in Conveyance Allowance :

• Meaning: Allowances included as part of the CTC are either fully tax-exempt or exempt up to certain limits.Conveyance allowance is paid to the employee for meeting the expenses incurred from home to office and vice-versa.It is exempt up to a certain limit.
• Existing: Currently, Conveyance allowance is exempt up to Rs.1,600 per month i.e. Rs.19,200 for the year.
• Issue: Considering the current cost of transport, the amount of existing transport allowance is far from the reality of the actual conveyance expenditure incurred by an individual even in nonmetro cities. However, this allowance was raised from an amount of Rs. 800 to Rs 1,600 in the Budget 2015. But, still not able to lower the burden of salaried class in incurring the current cost of transportation.
• Our expectations: We expect that the conveyance allowance must be raised to at least to Rs 3,000 per month to match up with the current cost of transportation. This allowance shall benefit to each and every salaried person be it in higher slab or in the lower slab.

20. Rationalization of HRA exemption:

• Meaning: House Rent Allowance or HRA is a part of the salary provided by an employer to his employee for his rented accommodation. HRA exemption can be claimed only if the employee is residing in a rented house. It is under Section 10 and the exemption from the tax can be claimed partially or fully as per the limits. HRA is a useful allocation of your salary component to save tax.
• Existing: Currently, HRA exemption is calculated as the amount which is least of the following three – rent paid less 10% of basic salary, actual rent paid and 50% of basic salary if you stay in a metro city or 40% if you stay in any other city. Currently, metro cities include Delhi, Mumbai, Chennai and Kolkata. Self-employed professionals cannot avail the deduction.
• Issue: Considering the current scenario many cities like Hyderabad, Bengaluru, Gurgaon and Pune where rents have seen a steep rise in the past decade. The government must provide the same status as of metro cities in the calculation of HRA. These cities attract a lot of qualified individuals from across India who stay in rented accommodations and lose out on the tax benefit in spite of paying a high rent.
• Our expectations: We expect that cities like Hyderabad, Bengaluru, Gurgaon, Pune Jaipur, Lucknow should be added in the list of the metropolitan city so that the benefit could be extended to the greater section of society. In the last few decades, some of the Indian cities have seen a steep rise in development in their infrastructure which has led to an increase in the rental charges.

21.Repair of House Property:

• Meaning: If the house property has been repaired or renewed or reconstructed with borrowed capital then the interest paid on such borrowed amount is allowed as deduction.
• Existing: Currently, the maximum deduction for interest on loan borrowed for house repair, renewal & reconstructed is allowed up to Rs. 30,000/-.
• Issue: The deduction amount for house renovation has been capped at Rs.30,000 a year, which is a quite low.The existing limit has not been changed for over a decade and doesn’t provide any benefit in the real sense as per the current rate of interest and inflation.
• Our expectations: We expect that in the view of common man’s sufferings, the Modi government would increase the threshold limit at least up to Rs. 1,00,000/- for an amount borrowed for acquisition, construction, repair and renewal.

22. Clarification on Section 194IB :

• Meaning: Any individual or HUF (even who are not liable to audit )paying rent to a resident exceeding the certain specified limit for a month or part of a month during the previous year are brought under the ambit of TDS.
• Existing: As per the provision, Individual or HUF shall deduct an amount equal to 5% of total rent payable/paid at the time of rent payment of last month of previous year or end of the tenancy period, whichever is earlier if the rent payment exceeds 50,000 for a month.
• Issue: Users are having an uncertainty in relation to this provision that if the property is vacated during the previous year and in the last month of the tenancy the stay was only for the part of the month then by which amount TDS needs to be deducted as per section 194IB. As in that case, the amount from which TDS needs to be deducted would be less than the TDS amount which is to be deducted & deposited. Hence, this will lead to loss to the treasury and defeat the purpose of law and it will invite the litigation.
• Our expectations: We expect that the individual or HUF have to deduct TDS at the time of rent payment of the last month of that F.Y. or end of tenancy period whichever is first. But TDS should be lower of the following:-
  • a) 5% of total rent paid during the F.Y.
  • b) Amount of Rent Payable in last month of P.Y.

23. Proposal for New Financial Year:

• Meaning: Financial Year means the year immediately preceding the assessment year and A. Y. means the year for which income is assessed of a person. F.Y. 2017-18 means – Income earned from 1st April 2017 to 31st March 2018 would be assessed in A.Y. 2018-19.
• Existing: In current situation F.Y. starts from April and ends to March and income is assessed accordingly.
• Issue: The April-March fiscal year was adopted in 1867 in line with the practice of imperial Britain.The time has come to end this colonial practice as there is really no reason why the fiscal year of the country should begin on Fool’s Day.The shifting of F.Y would benefit India in many ways like it would align India with the prevailing practice of developed countries. Further, MNC firms working in India, have to deal with two types of financial years i.e. here and in the parent country so a uniform structure will be a relief to manage their accounts. Also, this change will align the financial year with the crucial monsoon cycle which would help the government to get proper data on monsoon forecast for the new financial year and remove uncertainty while drafting the budget.
• Our expectations: Govt may propose the new F.Y based on the calendar year to resolve the above-discussed issues.This would be yet another historic change after the advancement of the budget presentation to 1 February this year under the Modi regime. Further, Madhya Pradesh has already shifted its financial year format to January-December from 2018 and became the first state to do so.

24. Set off Limit of house property should be increased:

• Meaning: Interest paid on home loan is eligible for tax benefit and can be set off with any other head of income(with few exceptions) which means that total income will reduce from the amount of interest paid.
• Existing: Earlier, the limit for Interest paid on the home loan was Rs. 2,00,000 if the house is self-occupied during the year but if it is rented then no limit was prescribed but in Budget 2017, the restriction was placed on setting off on Interest paid on home loan as Rs. 2,00,000 for both self-occupied and rented/deemed to be rented.
• Issue: The limit for the set of loss from house property was restricted to Rs. 2,00,000 and excess have to be carried forward as per the last budget 2017. Generally, a housing loan runs for 15 -20 years, it is unlikely that there will be sufficient house property income in next 8 years to absorb the interest of that particular year as well as the loss brought forward. Consequently, the loss will lapse after 8 years.
• Our expectations: We expect that limit of Rs.2 lakhs could be increased to Rs.3 lakhs per year considering the increasing cost of property and rate at which loans are availed to allow taxpayers to set off sufficient house property loss against other income.

25. Donations exceeding ten thousand rupees in cash – sections 80G and 80GGA:

• Meaning: Contributions made to various relief funds and charitable institutions can be claimed as a deduction under Section 80G. Donations made for scientific research or rural development can be claimed under section 80GGA
• Existing: In case of section 80G, from Financial Year 2017-18 onwards any donations exceeding Rs 2,000 in cash will not be allowed as deduction. Whereas in case of Section 80GGA, cash donations exceeding Rs 10,000 are not allowed as a deduction.
• Issue: People are confused as to whether the limit of Rs.2,000 or 10,000 as the case may be is applicable in respect of each individual contribution or with respect to the overall contribution made by a person during a year to an institution or to all institutions covered under section 80G(2) or 80GGA(2). In the wake of such confusion, people are not contributing to such organization and ultimately question marks are being put up on the provisions of law.
• Our expectations: We sought some kind of clarification on the applicability of cash donation limit of Rs. 2,000/- or 10,000/- as the case may be in the upcoming budget.This would serve the purpose of the provision inserted in an asserted way.
  Hopefully, the Budget would bring cheer to the common man and take India’s growth story forward.

(Disclaimer: Views expressed here are personal.)