Union Budget 2021 Expectations for Tax Relief: Increase in the maximum exemption limit under section 80C is long overdue and should be increased from Rs 1.5 lakh to Rs 2.5 lakh.
Union Budget 2021 Expectations for Tax Relief: Prime Minister Narendra Modi-led government has recently undertaken various measures to leave more disposable income with people and companies, to spur demand in the economy. Even as the government has already brought down the corporate tax and brought changes in the personal income tax slabs, there are expectations of further relief in tax liabilities in the upcoming budget. “Increase in the maximum exemption limit under section 80C is long overdue and should be increased from Rs 1.5 lakh to Rs 2.5 lakh. This will mobilise household savings and encourage investment,” Gouri Puri, Partner, Shardul Amarchand Mangaldas & Co, told Financial Express Online.
Currently, only if an individual earns less than Rs 5 lakh, is his income exempt by way of a tax rebate. This rebate mechanism could be used to give way to an increased basic exemption limit of Rs 5 lakh, such that no individual offers tax on their first Rs 5 lakh of income, Gouri Puri added. The budget 2021 poses unprecedented challenges for the government as never before in the history of the country has India faced such a situation. From being the fastest-growing economy in the world, India’s economy is now contracting. The government has already been quite responsive by issuing various compliance relaxations, financial incentives and other initiatives to help businesses.
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“During these times, reducing the tax burden on individuals to enable further spending, thus increasing demand in the economy is needed,” Neeru Ahuja, Partner, Deloitte India, told Financial Express Online. Finally, reassurance is needed on certainty and surety on regulations for at least medium to long term, instead of too many and frequent short-term changes, Neeru Ahuja added. A robust research and innovation policy is also the need of the hour, Ahuja further said.
Meanwhile, the corporate tax rates were cut before the pandemic to 22 per cent from 30 per cent for companies that do not seek exemptions, and to 15 per cent from 25 per cent for new manufacturing firms. Also, in the personal income tax, the rebate under Section 87A has been hiked to Rs 12,500. This would effectively make tax liability zero for taxpayers having net taxable income not exceeding Rs 5 lakh.