Budget Roadmap 2021: Income Tax- Salaried class needs new tax sops due to work from home costs

January 19, 2021 1:00 AM

Union Budget 2021 India: As per the provisions of Section 80D, an individual is entitled to claim deduction of medical insurance premium paid against insurance taken for self, the spouse, children and parents.

These could be in the form of tax rebates designed specifically to cater to the impacted taxpayers.Budget 2021-22: For income from trading, business or profession, income tax provisions allow expenses such as rent, depreciation, interest, etc., as deduction.

By Neha Malhotra

Indian Union Budget 2021-22: The upcoming budget is expected to provide temporary tax breaks to salaried-individual taxpayers who have suffered salary reductions or job losses because of the Covid-19 pandemic. These could be in the form of tax rebates designed specifically to cater to the impacted taxpayers.

For income from trading, business or profession, income tax provisions allow expenses such as rent, depreciation, interest, etc., as deduction. However, very limited deductions are available to the salaried class. The upcoming tax measures should look to increase the standard deduction from salary income. The standard deduction which allows for a predetermined amount to be subtracted from an individual’s salary before taxable income is calculated must be increased from the present limit of Rs 50,000 to counter higher inflation and maintain purchasing power of the salaried class.

Remote working
The apprehension that remote working is here to stay has made employers contemplate what can be paid tax efficiently and what changes need to be made to continue to motivate employees. Perks like company cars for business or free meals in the erstwhile course of business, now have no value for employees working from home. Instead, medical insurance, compensation in respect of home-office furniture expenses, are now on the top of the benefit hierarchy. Therefore, the upcoming Budget must include a stimulus package centred on home working.

On account of the ‘work from home’ advisory issued by the government, employees had to incur various additional expenditure for setting up home office. Some of the companies did reimburse their employees for such additional expenditure, however, employees are required to pay tax on such reimbursements as well. The government should allow deduction for expenditure incurred by individuals on setting up home office. This deduction could be on the actual amount of reimbursement subject to some maximum cap, or it could be in the form of an additional standard deduction. Granting deductions would greatly impact employee well-being.

Health insurance
As per the provisions of Section 80D, an individual is entitled to claim deduction of medical insurance premium paid against insurance taken for self, the spouse, children and parents. However, this deduction is limited to Rs 50,000 and Rs 75,000 for individuals below the age of 60 years and senior citizens, respectively. The government is expected to acknowledge that medical insurance premiums tend to increase beyond a particular age for an individual. The government should consider increasing the aforementioned applicable limits to at least Rs 75,000-1,00,000 and allow special rebates on medical insurance expenses owing to the coronavirus pandemic.

Most people buy a home by taking a housing loan. So, to ramp up the purchasing power of salaried individuals and back the real estate sector, and in turn the economy, the limit for deduction of interest on housing loan under Section 24(b) on self-occupied property should be withdrawn or be substantially increased from Rs 2 lakh. Besides, the deduction of principal amount of housing loan repaid be allowed as a deduction additionally over and above the limit of Rs 1.5 lakh under Section 80C or alternatively, the limit under Section 80C be increased from Rs 1.5 lakh.

The writer is director, Nangia Andersen LLP. Inputs from Paridhi Sen

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