Budget 2022: From cut in home loan interest rates to rise of health insurance premiums, here’s common man’s wishlist

With another wave of pandemic hitting the country, the taxpayer’s expectations from the Union Budget 2022 have increased significantly. While on one side the government is taking measures to bring the economy back on track, on the other side it is equally important to give relief to the common man to overcome the impact of this crisis. The expectation of the common man revolves around decreasing the tax burden and moving towards a more simplified tax compliance and administration framework. Some of the key expectations of the common man from this Budget are: 1. Deduction of interest on housing loan during construction period As per the present tax provisions, interest on a housing loan taken during the construction of a property is allowed as a deduction in five equal instalments commencing from the year of completion of such house property.  Many home buyers face a challenge due to this provision as they have to pay pre-EMI interest to the banks /financial institutions each year whereas, the corresponding tax deduction is postponed to future years. This results in an excessive financial burden on home buyers during the construction period and the burden is further extended if the construction gets delayed due to any reason. It is suggested that deduction for interest payable during the construction period may be allowed in the year of payment itself. Apart from financial relief, this would also promote ease of compliance since the taxpayers would not have to maintain records of interest paid for an extended period of time. Apart from the above, to boost the real estate sector, a higher deduction for interest on housing loans is expected. Presently, the home buyer is eligible to claim a deduction of up to Rs 200,000 towards interest payable during the year on a loan taken for purchase or construction of a self-occupied house property. This limit includes preconstruction period interest also. This limit should be increased to give more tax benefits to the taxpayers. 2. Increase in quantum of deduction under Section 80C The Finance Act 2014 had increased the threshold for deduction under Section 80 C of the Income-tax Act, 1961 (the Act) from Rs 100,000 to Rs 150,000 with the objective of encouraging household savings. In view of inflation on one hand and more avenues for consumption expenditure opening on the other, the household saving potential has been under stress. Currently, the deduction allowed under section 80C covers a wide range of eligible investments/ expenses such as payment of life insurance premium, employee’s contribution to Provident Fund, Public Provident Fund (PPF), National Pension Scheme (NPS), housing loan principal repayment, Equity-linked saving schemes (ELSS), etc. A major expectation of individual taxpayers is increasing the limits of various investment/ expenditure-linked deductions, under Section 80C of the Act to Rs 250,000 which will achieve the dual objective of encouraging savings and reducing tax. This will ultimately leave more cash in hand which can be channelled towards expenditure as well. Alternatively, the government may also consider introducing separate deduction limits for repayment of principal on housing loans. This benefit would also contribute to improving the real estate market and will be another step towards the affordable housing goal of the government for the common man of this country. Apart from ELSS, debt and hybrid funds can also be included for deduction under section 80C to encourage investors to invest in diversified funds. 3. Increase limits of deduction on health insurance premium Section 80D provides deduction in respect of payment made for health insurance premium for self, family, and parents. As per the provisions of Section 80D, an individual can claim deduction up to Rs 25,000 (Rs 50,000 in case of senior citizen) for health insurance premium paid for self, spouse, and family and similarly, a deduction up to Rs 25,000 (Rs 50,000 for senior citizen) for a premium paid for parents. Considering the increase in the rate of health insurance premiums with time and with rising expenses on healthcare due to COVID-19 and other reasons, the current deduction limit should be increased from Rs 25,000 to Rs 50,000 (and from Rs 50,000 to Rs 1,00,000 for senior citizens). This decision will also encourage more people to opt for health insurance policies and would contribute towards the growth of the insurance sector as well. Budget expectations of salaried class taxpayers 1. Tax exemption for Work from Home-related allowances and perquisites The COVID-19 outbreak has introduced a new arrangement of working from home for many salaried class taxpayers. To provide a better working environment to employees at home, organizations are providing certain facilities such as the provision of office equipment and furniture (printer, chairs, desks, and other accessories, etc.) to their employees. Though such equipment/ furniture is for the purpose of exercising employment, an element of personal use can be construed as the same is provided at the employee’s residence. Hence, it is expected that the expenses incurred towards such furniture and other home office set-up costs should be specifically exempted from tax in the hands of employees. 2. Leave Travel Allowance (LTA) exemption on an annual basis LTA is the payment made by the employer to the employee for expenses incurred on leave travel anywhere within India. As per present tax provisions, LTA exemption is provided for two travels undertaken in India in a block of four years. The very first 4-year block commenced in 1986 and covered the years till 1989. These provisions were introduced many decades ago and it is surely time to revise the same for providing higher benefit in terms of frequency of travel and coverage of eligible expenses. Considering the changes in standard of living and increase in spending power of taxpayers, it is suggested to provide LTA exemption on annual basis. Further, in many situations, expenditure towards stay in a hotel, food, etc. forms a major part of journey costs and hence, the same could also be considered while calculating LTA tax exemption. This proposal would also promote the tourism and hospitality sector which is one of the most affected sectors due to the pandemic. 3. Increasing the limits of standard deduction As per the present limits, salaried employees are allowed a standard deduction of Rs 50,000 from the taxable salary income. The rationale of providing such standard deduction is to cover many expenses incurred by the employees during employment. However, this limit does not absorb all the expenses that an employee may incur during a year. One may also compare the case of a self-employed professional versus a salaried individual. Expenses such as fuel and maintenance of the vehicle, telephone, and communication, books and periodicals, salary for staff employed as a driver or other support staff, etc., are a few expenses which are routinely incurred by both salaried individuals as well as self-employed professionals. However, while the self-employed professional is eligible to claim all expenses incurred for exercising her profession, a salaried individual is only entitled to a flat standard deduction of Rs 50,000. Hence, the government should consider increasing the standard deduction to at least Rs 1,00,000 or link the same to the salary threshold, so that the deduction for expenses is on a more equitable basis for individual taxpayers. 4. Increase limit for other salary-related exemptions Certain components of salary are eligible for deduction under Section 10 of the Act, subject to limits that were decided long back and have virtually become redundant due to inflation. It is expected that the limits of various exemptions like child education and hostel expenditure etc. be increased considering the present inflation index. 5. Increasing tax slabs under new personal tax regime Most of the deductions and exemptions discussed above are not applicable where an individual chooses the new personal tax regime introduced by the Finance Act 2020.  However, a large section of the salaried individuals makes investments and expenses which are covered under the old tax regime, and therefore opting for the new regime is disadvantageous. Therefore, if the government wishes to encourage more individual taxpayers to opt for the new tax regime and simplify tax administration/ compliance, the tax slabs need to be further rationalised so that the new regime is more beneficial. The road ahead To sum up, considering the difficulty of taxpayers amid the third wave of the pandemic, Union Budget 2022 is being looked upon as a ray of hope which can bring some sort of relief for the taxpayers. The individual taxpayers of the country are expecting significant reliefs which can be incentivised in actual monetary terms. The writer is Partner– Grant Thornton Bharat LLP; with inputs from CA Pooja Lara, Manager, Grant Thornton Bharat LLP. Read all the Latest News , Trending News ,  Cricket News , Bollywood News , India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.