Finance Minister Nirmala Sitharaman will present the union budget for FY22 on Feb 1 at a time when the country's economy has come crashing down due to the COVID-19 pandemic. This is her third budget presentation and it remains to be seen if she will be able to deliver on the promise of reviving the economy in these extraordinary circumstances.
The pandemic induced lockdown not only claimed livelihoods but also uprooted government finances. To revive the economy and spur the Indian growth story, the government had introduced various schemes including Atmanirbhar Bharat. The government had to empty its coffers to fund these schemes. Against this backdrop, experts believe that government should maintain a fine balance by easing tax norms for the middle class and tax the rich.
“In the upcoming union budget center is likely to tweak the list of eligible rebates, exemptions, and deductions to allow some more categories of financial savings instruments for taxpayers in the optional income tax regime introduced in the last budget. Tax breaks to medium-income groups earning up to Rs 15 Lacs would be provided by way increase in deductions on account of tax-saving expenditures or investments.” Rajat Mohan, Senior Partner, AMRG & Associates told The Bridge Chronicle.
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Experts hope that government will reduce the tax burden on households which would give a boost to demand in the economy. “This can be done by introducing tax breaks in the new tax regime without overhauling the basic tax slabs. These additional tax rebates and deductions may be more than compensated with the help of surcharges and COVID cess on the super-rich.” Rajat Mohan further added.
Any tax deduction towards increased health expenses due to COVID-19 can also be expected in this year’s budget.“As COVID-19 pandemic has severely impacted the jobs and income of individuals it is recommended that additional tax deductions for expenses incurred on Covid-19 tests and treatment in private hospitals should be allowed,” said Rahul Singh, Manager, Taxmann.
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Experts say that government should increase benefits under section 80D of the income tax act.
“Currently, deduction of medical expenses is allowed under section 80D. This deduction is allowed for up to Rs. 50,000 for incurring medical expenditure in the case of senior citizens. A non-senior citizen taxpayer isn’t entitled to claim a deduction of medical expenses irrespective of the fact that whether a health insurance policy is being taken or not. Thus, there is an urgent need to rationalize the provisions of Section 80D.” added Rahul Singh, Taxmann.
Sandeep Sehgal, Director-Taxes and Regulatory, AKM Global, sheds light on how the government could consider giving tax relief through other measures, He said “As the last year has been challenging for the taxpayers, some major tax reliefs can be expected in the form of increased 80C limit, upward revision in the standard deduction, relaxation for housing loan and interest repayments, deductions for work from home setup. Also, the increased surcharge brought last year for HNIs seems to be on higher side and some in relief in that regard should be expected to have more disposable income in their hands.”
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