Union Budget 2021 India: It is necessary to put more money in the hands of people who are facing financial problems for a long time.
Union Budget 2021-22 Expectations for Taxpayers: The Covid-19 pandemic and the resultant lockdowns not only dealt a deadly blow to the global economy and a majority of industries, but also hit the common man and taxpayers hard. While millions of people lost their jobs, a majority of employees had to take pay cuts, which is still continuing in many cases. It is, therefore, necessary to put more money in the hands of such people who are facing financial problems for a long time.
With the Budget 2021 being presented today, all eyes are now set on Finance Minister Nirmala Sitharaman. Here’s what taxpayers expect from the Budget this time.
1. Revision in tax slabs
In the current pandemic scenario wherein individuals are facing financial impact, it is necessary to put more money in the hands of the common man for revival of the economy. Hence, “it is recommended to lower the highest tax rate from 30% to 25% and also increase the threshold from Rs 10 lakh to Rs 20 lakh for individuals not opting for the special regime,” says Divya Baweja, Partner, Deloitte India.
2. Work from home deduction
The current pandemic has resulted in promoting a culture of ‘Work from Home’ which will be encouraged by employers in times to come as it reduces transportation cost, travelling time and improves work life balance. As employees would be incurring additional expenditure such as internet charges, rent, electricity, furniture etc to create a home office, it is recommended that an additional standard deduction of Rs 50,000 should be introduced for expenditure incurred while working from home.
3. Simplified tax regime
While the introduction of the ‘simplified tax regime’ in the Finance Act 2020 has provided some relief to taxpayers, it is recommended that loss from house property be allowed as a deduction in the simplified regime as well, subject to the existing limit of Rs 2 lakh. This would increase the disposable income in the hands of individual taxpayers and motivate them to get covered under this regime.
4. Increase in Section 80C limit
The deduction under Section 80C has remained unchanged since the Finance Act, 2014. The section is meant to provide relief to individuals for specified investments and expenditure, while at the same time channelise investments into areas that support the economy. However, “over the years, the scope of this deduction has become too wide as compared to its very modest limits. As such, the exemption limit under Section 80C can be enhanced from Rs 150,000 to Rs 250,000, which would provide tax savings in the range of Rs 20,000 to Rs 30,000, depending upon the income level,” says Baweja.
Alternatively, a separate deduction could be provided for expenses such as children’s tuition fees, provident fund contributions, life insurance premium and housing loan principal payments as compared to the investment-oriented items in that scope.
5. Increase deduction limit for health insurance
Healthcare costs continue to rise and hence people need a higher health insurance cover. This has become even more critical in light of the pandemic with increase in hospitalisation costs. “The government may consider increasing the investment limit in respect of payment towards health insurance premium under Section 80D from Rs 25,000 to at least Rs 50,000 for self and family, and for senior citizens, dependent parents, from Rs 50,000 to at least Rs 75,000,” says Baweja.