How can Budget make us richer -by Rajesh S

There are great expectations being built up around Budget 2008, as it is the last Budget from this government before the general elections. People are looking to it for relief in an economy where inflation and taxes leave little to be enjoyed.

The significant increase in direct tax collections in the current financial year has also raised the expectations of individual taxpayers. According to the latest data releases from the Central Board of Direct Taxes, direct tax collections have recorded a robust growth of over 40% for the April to 15 January period.Salary earnersRe-introduction of the standard deduction could be an easy option to give the salaried section a boost and encourage them to spend more. There are also hopes being voiced in certain sections about the fringe benefits tax (FBT). Salaried taxpayers are wondering if the rate of FBT will be eased on some perks and if employee stock options will be exempt from this tax. Another welcome sop will be an increase in the exemption limit for medical reimbursements by employers (currently capped at Rs 15,000). It is also time that the tax exemptions available on payment of interest and repayment of principal on home loans are revised. An increase in the exemption limits would encourage investment in property. Coupled with some moderation in home loan rates, this may aid the real estate business.InvestorsCurrently, the ceiling for investment of capital gains in infrastructure bonds is Rs 50 lakh. The government should increase the limit or completely withdraw the cap, which is considered very restrictive, especially when the funds are directed towards infrastructure growth. The finance minister may also consider including bonds of other companies that promote growth of important sectors of the economy like education, agriculture, manufacturing and real estate.It is also necessary to clarify the tax positions applicable to individuals who are taxed in India on their worldwide income. Indian tax laws exempt capital gains derived from the sale of a long-term capital asset when an individual invests the gains in specified assets, including a house property. However, it is not clear whether investments made in a house property outside India will be eligible for this exemption.GeneralThe ceiling, as well as number of investments that qualify for tax exemption under Section 80C could be raised. Also, higher deduction could be permitted towards insurance premium payments by individuals (currently Rs 15,000; for senior citizens Rs 20,000). As with every Budget, this time around too, taxpayers expect income tax slabs to be aligned with the rate of inflation and the pace of the growth in other sectors of the economy. Relaxed rates might work as an incentive towards voluntary compliance. Hopefully, no further elements (i.e cess, surcharge) are added to the rate. Taxpayers are also hoping for some steps taken towards a simplified tax regime. For instance, improving administration in PAN allotment, tax refund and assessments will be welcome. It would also help if the government introduces a joint tax filing system for married couples, giving them additional tax concessions, similar to the system followed in the US.

-The author is Director-Tax Practice, Ernst & Young, India