Union Budget 2021: Taxpayers hope for lower income tax, deductions on medical treatment, incentives for WFH
It is worthwhile to note that the major impact of the pandemic is not only on the general public or different sectors but also on the government
The pandemic shook the economic base of our country escalating the normal expectations of the past year. The hardest hit of the pandemic is the lower class and lower-middle-class. Therefore, all hopes in the eyes of a common taxpayer are on the forthcoming Budget. Post-pandemic, the GDP is slowing down, inflation, recession, among others is impacting the economy and there is a strong need for a positive Budget.
It is worthwhile to note that the major impact of the pandemic is not only on the general public or different sectors but also on the government--funds released in the lockdown period to serve the nation have impacted the Treasury, and lesser earnings in terms of tax collection have created a higher unexpected deficit.
What can be expected from Budget 2021
Marginal relief concept is the most expected in personal taxes/direct taxes so as to be able to handle anomaly of a higher tax on lower income. As of now, if your net taxable income is up to Rs 50,0000 then your tax liability is nil and in case you earned Rs 100 more i.e. Rs 50,0100, you will end up paying tax of Rs 12,520, meaning thereby Rs 12,520 tax on Rs 100 incremental Income. Earlier there was the concept of marginal relief restricting tax amount maximum up to incremental income only. Hope the government will make this simple for taxpayers.
Slab rates to remain constant, unchanged basic exemption limit. This year there is an expectation of at least an increase in basic exemption limits with revised tax rates overall benefitting the local individual. There is a lower expectation of a reduction in the tax rates, as a collection of revenues to the government is equally important in today's situation.
A deduction on medical treatment and a full process of COVID-19 vaccine drive. There are expectations of 100 percent deduction of expenditure.
Standard deduction to salary class is expected to increase from Rs 50,000 to Rs 75,000 or more. Reducing inflation needs liquidity and to encourage investments from the general public, such investment deductions should be introduced in various forms under Chapter VI A or the introduction of any other section. It is a long-awaited expectation to increase the limit of Section 80C to Rs 25,0000 in place of the existing Rs 15,0000.
Work from home is the new trend that has increased the expenditure of employees; hence providing incentives for the same to employees will be a great idea. Housing and real estate sectors are hard-hit this pandemic period and it is expected that standard deduction u/s 24 would be increased from 30 percent to 40 percent.
Faceless assessment and appeals are a reality now and the government should try to ensure that with new rules, regulations, and SOPs an honest taxpayer is not left at the mercy of a faceless tax officer who for the sake of adopting new assessment process, willingly or unwillingly, increases the unnecessary paper and documentation burden of the assessee. This will defeat the purpose of honouring the honest.
A new cess in the form of Covid Cess or health cess is also the talk of the town.
The writer, a qualified CPA (Ireland) and Fellow Chartered Accountant (India), is founder and chairman, HostBooks Ltd
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