Union Budget 2021: Need higher focus on demand revival, boost in growth engines to spur Covid-battered economy
Updated: Jan 18, 2021 2:21 PM
Union Budget 2021 India: As the countdown for the Union Budget 2021 has begun, all eyes are now set on how the Finance Minister’s attempts to walk the tightrope to strike a balance and play the role of a catalyst in the unprecedented time of the pandemic crisis.
Finance Minister Sitharaman said the forthcoming Budget 2021 will be like no other in the past and will help India emerge as the engine for global growth. Image: Reuters
By Rajeshree Sabnavis, Nikky Shah
Indian Union Budget 2021-22: As the countdown for the Union Budget 2021 has begun, all eyes are now set on how the Hon’ble Finance Minister’s attempts to walk the tightrope to strike a balance and play the role of a catalyst in the unprecedented time of the pandemic crisis.
Finance Minister Sitharaman last week said the forthcoming Budget 2021 will be like no other in the past and will help India emerge as the engine for global growth. Amid the current situation, there is a pressing need to strengthen the engines of growth and promote the economy by enhancing consumer spending, revive demand and boost the ease of doing business in India to seize the space being vacated by some other consumption led economies. With this backdrop to bring the Covid- battered economy back on track, we have encapsulated below few expectations of the common man and Industry at large from the Union Budget 2021:
Recommendations/ Expectations to stimulate household consumption and saving:
In order to augment private consumption and increase disposable income in the hands of people to revive demand, the Government may consider revising upwards the direct income tax slabs for Individuals and reduction in non-corporate income-tax rates. Further, the overall investment limits under Section 80C of the Income-tax Act, 1961 (Act) should be enhanced to keep in pace with inflation. Considering the current health situation in the ongoing pandemic, an enhanced deduction from the present limit of INR 5,000 for health checkup deduction for medical test and treatment is the need of the hour.
Work-from-home being the new normal these days, introduction of standard deduction for additional expenditure incurred by salaried class to meet communication and infrastructure requirements would be much appreciated by the salaried middle class. Further, the pandemic has also accelerated demand for own homes and with work from home being a viable option today, many future homebuyers may like to shift to the bigger house to accommodate working space. Keeping this in mind and to mobilize demand in the real estate sector, the Government should consider increasing the limit of interest deduction paid on home loan from two lakh to three lakh.
Creation of jobs are of paramount importance to revive the growth engine of India. Currently, taxpayers can claim a prescribed deduction of 30% of the amount of additional employee cost for three assessment years under section 80JJAA of the Act. However, the deduction is restricted to employee whose total emoluments are not more than INR 25,000 per month. Accordingly, it is suggested to increase the cap on emoluments from INR 25,000 to 50,000 to give spur to skilled job creation.
Additionally, businesses remained inoperative for a considerable period of the year due to nationwide lockdown; however, most of them continued to pay the salary to their employee during the lockdown. Accordingly, the Government may consider providing additional deduction i.e. 150% to 200% of the salaries paid during the nationwide lockdown as an incentive for enduring employment.
Ease of Doing Business:
To emerge as a viable option for foreign firms exiting China, in addition to building and strengthening India’s supply chain capacity, Indian government needs to simplify legislations supported by liberal tax compliance regime. In this regard, the Government may, inter-alia, consider curtailing the scope of transactions covered under TDS and TCS compliances, abolish applicability of Income Computation and Disclosure Standards, relaxations to non-resident taxpayers in return filing compliances where taxes have been appropriately withheld and provide clarifications on certain vexed issues particularly on the new charge of Equalisation levy and TDS/TCS provisions on e-commerce. These measures will go a long way in boosting investor’s confidence, improve the ease of doing business in India and reinvigorate confidence in the Indian economy.
(Rajeshree Sabnavis is Founder and Nikky Shah is Manager at Rajeshree Sabnavis & Associates. Views expressed are the authors’ own.)