Budget 2021 Income Tax Expectations: Experts and individuals are hoping that Finance Minister Nirmala Sitharaman will raise the Income Tax deduction limit under Section 80C
Budget 2021 Income Tax Expectations: Experts and individuals are hoping that Finance Minister Nirmala Sitharaman will raise the Income Tax deduction limit under Section 80C of the Income Tax Act up to Rs 3 lakh in the upcoming Budget.
Currently, under Section 80C, a deduction up to Rs 1.5 lakh can be claimed for investments made in various instruments like PPF, five-year bank FDs, Provident Funds, Life Insurance premium paid etc.
“It is expected from upcoming budget 2021 that there should be an increase in the deduction limit of section 80C from Rs 1,50,000 to 3,00,000 p.a,” Ankit Sehra, Founder and Tax Expert, Ankit Sehra & Associates.
“This will boost more investment and eventually lead to the overall development of the country,” he added.
Sehra is hoping that this time the Government would be adopting a clear distinction between Long term and Short-term savings. He said that currently there is no major support in the tax policy to encourage long term savings, which is a need of this pandemic cycle.
“Life insurance and Pension funds are a major source of savings for long term purposes. This time we can expect that the Government would consider the separate exemption limit for both of them apart from section 80C,” he said.
In its Budget 2021 preview, Yes Securities is expecting a hike in Section 80C limit to Rs 2.5 lakh.
” Govt has already unleashed slew of measures to prop the supply side of the equation. On demand side, it is imperative to augment disposable incomes of households, which will recalibrate the economic equilibrium,” Yes Securities said. It is also expecting favourable policies to boost the real estate demand, including an increase in the exemption for principal repayment on home loans. Yes Securities expect that exemption for principal repayment on home loans should match the HRA limits for salaried class.
Personal tax relief expected
Individual taxpayers are hoping for personal tax relief in the budget. In a survey by FICCI and Dhruva Advisors, nearly 40 per cent of the participants felt that ‘personal tax relief’ should be the key theme of direct tax proposals in this year’s budget.
Further, nearly 47% of the respondents said that their biggest demand from the Government in respect of direct tax is ‘widening of the tax slabs’.
The Union Budget is used as an occasion by the Government to introduce measures for simplifying the taxation system and making compliance easier. The survey participants were asked to highlight their current pain points from the taxation perspective and how the Government could support them. Results show that ‘timely receipt of refunds’ was a key challenge faced by as many as 52 per cent of the respondents. This was closely followed by ‘tax compliances’ and ‘tax litigation’ with 49% and 43% of the respondents respectively reporting the same.