By Shailesh Kumar
The new year not only brings in a new ray of hope and excitement but also raises anticipation amongst taxpayers with regards to the presentation of the Union Budget for the forthcoming fiscal year. Any reduction in income-tax results in a direct increase in the disposable income in the hands of taxpayers. Now with a prolonged pandemic, taxpayers look forward to more reduction in their income tax liability, in order to have more disposable income. Some of the income tax relaxations that taxpayers expect from Budget 2022 are explained here.
Tax rate slabs
Despite the government introducing and increasing tax rebates, there has always been a gap between the expectations of taxpayers and tax rate cuts extended by the ministry. Budget 2020 was the last occasion, when a relief on income tax slabs was granted by introduction of an alternative regime of taxation wherein individual taxpayers could avail lower rates but at the cost of giving up the benefit of various tax deductions and exemptions.
In Budget 2022, taxpayers expect that the government may rejig the income tax slabs again, to give relief to taxpayers. It will be really beneficial to taxpayers if the basic exemption limit for all taxpayers is fixed at Rs 5 lakh, while income up to Rs 10 lakh is taxed at nominal income tax rate of 5%. Tax rates for taxable income exceeding Rs 10 lakh may be accordingly rationalised.
Increase in exemptions
A major section of individual taxpayers belongs to the salaried class. The exemptions provided under the Income-tax Act, 1961 have not been revisited by the government for quite some time. Considering the present level of inflation, the amount of standard deduction currently available against salary income should be revised from existing Rs50,000 to minimum Rs 1 lakh.
The recent times of Covid has seen an increased expenditure by taxpayers towards medical and life insurances. Individuals who did not have medical insurances or life insurances are now resorting to the same because of the uncertainties related to medical expenses and increased risk to life. With the increased medical claims, insurance companies have increased their premium charges resulting in increased costs in the hands of taxpayers. It is hoped that the government will revisit the existing thresholds for deduction allowed under Section 80C and Section 80D respectively, and increase the same at least by 50%, commensurate with the increased cost of life and medical insurance.
Exemption for Covid patients, families
The government had provided for exemption of financial help received from employer or kin for meeting Covid-19 expenditures and upon death of a person suffering from Covid-19. The government press release stated that necessary legislative amendments shall be proposed, however no such amendments have been announced till date. Considering that it is almost Budget time now, the government may come up with necessary changes in law in this regard.
The pandemic has had its impact on all walks of life and in the current times it is unlikely the government will take any decisions without actually analysing the impact of it. It is hoped that the government will strive and tailor-make this Budget more pandemic-centric and empathetic to balance off undue and unforeseen losses and difficulties faced by taxpayers.
The writer is partner, Nangia & Co LLP