The tax slabs have been the same for a long time while inflation has pushed the cost of living upwards. It would make sense to revise the tax slabs upwards to provide relief to the salaried class and spur consumption.
The budget could include policies around increasing the deduction limit and allow for an added rebate to Covid-19 related expenses.
Budget 2021 expectations of the common man: With the economy slowly recovering from the pandemic, experts say a huge governmental push is the need of the hour. Having spent a major part of 2020 at home, consumers have spent large sums of money on tech upgrades at home and connectivity bills.
Sashank Rishyasringa – Co-Founder and MD – Capital Float says, “Tax breaks on expenses incurred due to the new work from home normal would be welcomed nationwide.” He further adds, “Especially this year, citizens and more specifically, the Indian middle class are expecting an increase in the limit under Section 80C of the Income Tax Act.” Hence, increasing the cap on such tax-saving instruments will lead to larger disposable incomes and increased sentiment towards investment, which experts say is crucial for economic revival.
Prateek Mehta, Co-Founder and Chief Business Officer, Scripbox says, “The tax slabs have been the same for a long time while inflation has pushed the cost of living upwards. It would make sense to revise the tax slabs upwards to provide relief to the salaried class and spur consumption.”
From the taxation point of view, experts say the budget must bring in some tax reforms as well as relief to increase the spending power of the consumer. Tanul Mishra, CEO, Afthonia Lab says, “Better tax infrastructure that is more simplified and incentivized should be introduced in the budget. Also providing tax holidays or tax relief to startups and MSMEs will encourage them to hire and retain talent which will further lead to an increase in employment.”
Furthermore, industry experts say the removal of long-term capital gain tax and reforms will push consumers to spend and infuse money into the economy. Saumya Shah, Founder, of Tarrakki, says “AMFI’s proposal on Switching of Units from a Regular Plan to Direct Plan or vice-versa; within the same scheme of a mutual fund, should be not regarded as transfer and hence, shall not be charged to capital gains. Removal of capital gains when switching in the same scheme will encourage investors to switch from high-cost regular plans to low-cost direct plans helping investors to save up to 1.5 per cent of their AUM annually.”
Experts say, the penetration of investment options in the Indian market still remains low as a percentage of GDP. Mehta of Scripbox says, “To improve participation in equity markets, the LTCG should be abolished. In addition, to improve participation in Debt instruments, the long-term period should be brought down to 1 year from 3 years.”
Additionally, industry experts believe the introduction of DLSS (Debt Linked Savings Scheme) will help channelize long-term savings of retail investors into higher credit rated debt instruments with appropriate tax benefits which will help in deepening the Indian Bond Market while also help investors to park their monies in a proposed shorter lock-in product (5years) v/s a PPF (15years) or NPS(till retirement).
As a result of the pandemic, health insurance has shot to the top of everyone’s list, given the added medical expenses incurred by taxpayers. Rishyasringa of Capital Float says, “The budget could include policies around increasing the deduction limit and allow for an added rebate to Covid-19 related expenses.”
Finally, a large population of senior citizens in India do not have the benefit of a pension scheme. Industry experts say, by introducing a universal pension program with senior-friendly tax structures, the Government has the opportunity to give financial freedom to that segment of the population.