NEW DELHI, FEB 24:
The Standing Committee of Parliament on Finance is likely to recommend a deduction of Rs 3.20 lakh for income-tax relief. This limit may be made available for long-term savings, investment and expenditure on life insurance, health insurance and education for children.
The committee may also recommend exemption limit for income-tax at Rs 3 lakh per annum as mentioned in the draft report, although some members are reportedly still pushing to increase it to Rs 5 lakh.
The Direct Taxes Code (DTC) Bill tabled in Parliament had proposed a limit of Rs 2 lakh from the current limit of Rs 1.80 lakh.
The committee is scheduled to finalise its views on DTC Bill by March 2, for which a meeting was held on Friday. “The members appear to be in agreement over incentivising long-term savings and social security expenditure. So, a higher limit could be a part of the final report,” a person familiar with the development said.
At present, investments up to Rs 1 lakh in specified instruments are deducted while calculating tax liability. These specified instruments include life insurance policies, public provident fund, equity-linked saving schemes of mutual funds, National Saving Certificates.. This limit also includes school fees for two children. In addition, investments up to Rs 20,000 in infrastructure bonds are also exempted from tax.
However, the majority view in the committee is that the limit on long-term savings eligible for exemption from income-tax be increased to Rs 1.50 lakh as against Rs 1 lakh proposed in the DTC.
On the other hand, limit for tax deduction by incurring expenditure on life insurance and health insurance may be hiked to Rs 1 lakh from Rs 50,000 proposed in the DTC Bill.
There also appears to be consensus to provide an additional limit of Rs 50,000 for expenditure on children’s education.
The Bill lays down a ceiling of Rs 50,000 on the amount of deduction available in respect of payments made for a life insurance policy, health insurance policy and education of children, all combined. In order to promote social security for senior citizens, the majority view is that an additional deduction on account of health insurance premium paid for dependent parents to the tune of Rs 20,000 may be separately allowed.
The Committee is unlikely to make any change in corporate tax. The DTC Bill proposed 30 per cent rate for corporates, without any cess and surcharges. On the other hand, the committee may suggest to the Government to review the General Anti-Avoidance Rules keeping in view the Supreme Court’s judgment in the Vodafone tax matter.
Business Line : Industry & Economy / Economy : I-T relief: House panel may push for higher deduction of Rs 3.20 lakh