Union Budget 2021 Income Tax expectations: All eyes are on the upcoming budget, coming after 10 months of sufferings due to Covid-19 pandemic.
Union Budget 2021 Income Tax expectations: All eyes are on the upcoming budget, coming after 10 months of sufferings due to Covid-19 pandemic. Common middle-class taxpayers are especially looking for reliefs after months of hardship. Whether the Government will make them happy is yet to be seen but expectations are high for tax reliefs in the form higher deduction limit under Section 80C, deduction for work from home expenses etc. Introduction of a covid cess on HNIs is also expected.
“The financial health crisis of 2020 has already pushed the government to initiate a slew of measures to sustain the economy, in the form of policies and packages. Further, the GOI in the upcoming budget may focus on, inter-alia, imposing covid-cess on HNIs or companies to bridge the estimated budget deficits,” Udit Garg , Founding Member, Goal Teller told FE Online.
Garg, however, also feels that instead of punishing the HNIs with a covid cess, the government may increase the currently applicable cess rates.
“On contrary to the general consensus of the market, we feel that instead of levying an additional cess on HNIs, who are already bearing the brunt of amended surcharge rates, GOI can increase the current cess rates from 4% to 5% for all the taxpayers. This may lead to an overall increase of tax inflow by 6 to 7 thousand crores. Although, the increase in taxes can be indirectly considered as an increase in inflation, because the taxpayer will have to earn an additional ~1% to avail the same basket of goods,” said Goel.
Work From Home deduction
Ashok Shah, Founding Partner, NA Shah Associates, said due to adoption of Work from Home (WFH) norms, taxpayers have to incur additional expenses. There is no clarity regarding claiming these expenses as business expenses. Many expenses are also not reimbursed by employers such as increased electricity bills, internet charges etc.
Shah further said that many countries in the world have recognised this and come out with guidelines to the taxpayer for claiming such expenses. For example, Australia has come out with following guidelines for taxpayers to claim a deduction for work from home:
Expenses which taxpayers can claim
- Electricity expenses associated with heating, cooling and lighting the area from which you are working and running items you are using for work
- Cleaning costs for a dedicated work area
- Phone and internet expenses
- Computer consumables (for example, printer paper and ink) and stationery
- Home office equipment, including computers, printers, phones, furniture and furnishings – you can claim either the ·full cost of items up to $300 or decline in value (depreciation) for items over $300.
Expenses which taxpayers cannot claim in Australia:
- The cost of coffee, tea, milk and other general household items your employer may have provided for you at work
- Costs related to children and their education, including setting them up for online learning, teaching them at home or buying equipment such as iPads and desks
- Items that are reimbursed for, paid directly by the employer or the decline in value of items provided by the employer – for example, a laptop or a phone
- Time spent not working, such as time spent on homeschooling children or lunch break.
- Occupancy expenses such as rent, mortgage interest, water and rates.
“Many other jurisdictions have announced similar measures. Indian Government should announce a similar measure to compensate taxpayer who has incurred additional costs by working from home,” said Shah.
Tax slab change, 80C and 80D relief
For reviving the COVID-19 battered economy and boosting growth, Finance Minister Nirmala Sitharaman has promised a “never before” like Union Budget this year. She has assured help to those areas which are now going to be the centre for newer demand and newer engines of growth.
“Middle-class expects the government to extend some tax benefits as a part of the relief for the badly hit sector during pandemic,” said CA Aditya M Agarwal.
“Middle-class wants the government to allow an increased deduction for the interest on home loans from the taxable income, a reduction in EMI/Rent is also something that people suffering the pandemic stress are expecting,” Agarwal said.
“Higher deduction limit under Section 80C and 80D by increasing the medical health insurance and mediclaim limits would also strengthen people towards an insured medical treatment in the world which is still not corona free,” he added.