A lot of people are trying to change our country. The way elections happen, the way schools run, the way govt. uses CBI for its own use, the way the judicial system works, etc. – the whole system needs to be changed!
In the same way, Taxation is one aspect of personal finance which needs some changes too. This is one sensitive topic I want to raise today – “Expenses allowed for Tax Deductions before paying tax”
We all are aware that some deductions are allowed for saving tax – like up to Rs 1 lac through section 80C and many more. However, the taxation law has not considered some of the things which are very relevant in today’s world and should be considered as per logic, but the law does not recognize it.
There is only one parameter for taxation today and that’s “Income”. What about “Expenses“?
Each person is different and the number of family members compared to others is different. Each person’s living expenses are different and their liabilities are different too. Hence, there should be some consideration for this while taxing that person.
Imagine this situation:
There are two people Robert and Ajay. Robert lives in Mumbai earns Rs.12 lac per year in hand, whereas Ajay works in Indore and earns Rs.6 lacs a year. Robert and Ajay both put Rs.1 lac in 80C investments and then have to pay the taxes. Ajay pays tax on 11 lacs, which comes around 1.8 lacs, where as Ajay gives a tax of Rs.30,000. So Roberts pays higher taxes than Ajay.
Now, what about a number of family members in Robert’s House? What about the burden of children education on Robert which is very high in Mumbai- which Ajay might not have?
What about the expensiveness of the city like Mumbai where Robert has to spend a lot of money on fruits for his elder parents- which might not be the case with Ajay? If Robert has 6 family members including parents, 2 children and 1 sister- total of 7 members, then what will happen?
All them need food, clothes, basic necessities which one can’t escape! Should govt not consider these points before applying the tax. Should there be a minimum limit of deduction for all these points? Read these 7 Income tax-saving tips you might now know
Some Deductions allowed but are they realistic?
1. Conveyance Allowance-
Till date its just Rs.800 per month, which I feel is way too low for many people. A lot of people spend on an average 3,000 – 4,000 in commuting and that makes a 30k-40k valid deduction on travel to work.
2. Tuition Fees for Children Education –
Why only tuition fees is allowed for deductions, what about school dress, books, coaching classes, school bus fees, computer for study purpose. Are these not justified these days?
3. Health Expenses –
Only Rs.15,000 worth of medical bills are reimbursed, but are they realistic today? What if I have both parents who are not well and I spend Rs.50,000? What is the basis of limiting to medical expenses which are not in my control.
4. Rent –
Why rent paid is not considered as a valid deduction? What if I don’t have HRA component? What if I am not a salaried class? Why do I pay price for high rentals in our country? What if my rent is high because I live in Bangalore or Mumbai?
5. Grocery –
Food bills are a necessity and I don’t think one should be paying any tax on the amount spent on grocery. If a family has 5 people and their grocery bills are around Rs.8,000, that’s around 1 lac a year, then should this amount be not allowed as a valid deduction?
That’s a necessity of life, I can’t do anything about it.
Watch this video to learn more about Indian Tax System:
Single vs Married?
There should also be a consideration for married people who have just one source of earning. Why families should not be seen as one entity. If there is a family where husband and wife both are earning, but the consumption level is almost what a family with an earning husband and a housewife is there.
There can be a single earning point and multiple consumption points. That should also be accommodated in some manner.
These are all the points which just come to my mind, some of these might be making sense and some might not. Not sure how others think about it?
Can you share your comments on this?