Union Budget 2021-22 Expectations for Taxpayers: The Union Budget 2021 is to be presented by Finance Minister Nirmala Sitharaman on February 1, which is just two days away. With the price of living on the rise and disposable earnings taking a hit on account of the pandemic, the ‘aam aadmi’ is eagerly hunting forward to the Budget in the hope of their collective voices getting heard.
Below is a want list that the Indian middle class and taxpayers hope to see in the Union Budget 2021:
Rationalising tax slab prices
The Budget 2020 adopted a carrot and stick strategy exactly where reduced slab prices had been offered only to these taxpayers who opted to forego (virtually) all tax deductions and rewards.
At present, only these folks earning Rs 5 lakh or much less are exempt from paying taxes. However, the convoluted rebate structure is such that a particular person earning Rs 5.10 lakh will have reduced following tax disposable earnings than a particular person earning Rs 500,000!
“This is because the moment your income exceeds Rs 500,000, you are required to pay tax on the entire income in excess of Rs 2.5 lakh which is the basic exemption limit for most individual taxpayers. This complex rebate structure should be done away with and the basic exemption limit of Rs 250,000 should be increased to Rs 500,000. Also, there exists a strong case to reduce the tax rate to 5% for incomes up to Rs 8 lakh,” says Amit Singhania, Partner, Shardul Amarchand Mangaldas & Co.
Increase in Section 80C limit
For really some time the deduction limit beneath Section 80C of the Income Tax Act has been capped at Rs 1.5 lakh. Many budgets have passed and the typical man is nonetheless in the hope that the limit will ultimately be elevated. It is about time that the similar is elevated to Rs 3 lakh as the similar will incentivise savings and investments for the typical man.
Work from house deduction
The present pandemic has resulted in advertising a culture of “Work from Home” which will be encouraged by employers in occasions to come as it reduces transportation price, travelling time and improves work life balance. “As employees would be incurring additional expenditure such as internet charges, rent, electricity, furniture etc to create a home office, it is recommended that an additional standard deduction of Rs 50,000 should be introduced for expenditure incurred while working from home,” says Divya Baweja, Partner, Deloitte India.
Widening the secure harbour limit for Section 50C
By way of a current notification, the secure harbour limit for Section 43CA and Section 56(2)(x) has been temporarily elevated from 10% to 20%, in order to increase demand in the genuine estate sector and to allow the genuine estate developers to liquidate their unsold inventory at a price substantially reduced than the circle price and providing advantage to the house purchasers. Therefore, for these transactions, circle price shall be deemed as sale/obtain consideration only if the variation in between the agreement worth and the circle price is more than 20%.
However, “this benefit is not available to secondary sale of immoveable properties by the existing home owners (Section 50C), which seems prejudicial. In light of the pandemic, real estate prices have taken a hit and many home owners may be forced to take a big haircut on the sale price of their properties. Accordingly, it will only be fair to increase the safe harbour limit from 10% to 20% for Section 50C purposes as well,” says Singhania.
With the Budget 2021 getting particularly vital in light of the monetary effect that the pandemic has resulted in, it will be fascinating to see how the Finance Minister balances public expectations with the agenda to stimulate demand a revive the economy.