Union Budget 2021-22 Expectations for Direct Taxes: Expectations are higher as Finance Minister Nirmala Sitharaman is going to present the Union Budget for 2021-22 on February 1, 2021 amid Covid-19 pandemic.
However, due to the financial slowdown and loss of income due to nationwide lockdown, the government has restricted scope to dole out considerably incentives.
“Given the fiscal constraints, the scope for reduction of tax is very limited. On the other hand, Covid cess could be a reality,” mentioned Divakar Vijayasarathy, Founder & Managing Partner, DVS Advisors LLP.
“On the whole, tax rates would mostly remain intact,” he added.
On the revenue tax front, Vijayasarathy expects the following measures:
Increase in tax-saving investment limits: The government will be in a position get extended-term funds at a fixed price very easily by growing the limits of tax-saving investments beneath a variety of sections – like 80C, 80CCD(1B) and so forth.
“Further investment based deductions and expenditure based relief can be anticipated,” mentioned Vijayasarathy.
BUDGET 2021 Expectations: Taxpayers want the old revenue tax regime to continue
Deductions on Covid-connected expenditures: To assistance folks struggling financially following obtaining infected by Covid-19, Covid-connected hospitalisation expenditures could be permitted as tax deduction.
Introduction of a new category of tax-saving bonds: To shore up its sources, the government might launch a new category of bonds eligible for tax deduction – like Covid bonds.
Tax incentives for non-resident investors: To attract foreign capital in a variety of sectors, the government might minimize compliance and provide profitable tax incentives for non-resident investors.
However, Harsh Bhuta, companion of Bhuta Shah & Co LLP expects that the Finance Minister (FM) would make some alterations in the tax slabs.
Bhuta expects that the FM might take following measures:
Increase in revenue tax threshold limit: FM would contemplate reintroduction of single tax slab structure and improve the minimum taxable revenue threshold to Rs 7.5 lakh.
Tax incentives on work from property expenditures: Work from Home (WFH) allowance / reimbursements produced by employers to personnel would be explicitly produced non-taxable in the hands of the employee and permitted as a company expense in the hands of the employer.
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Reduction in LTCG holding period of debt funds: The government would contemplate reduction in holding Period for capital gains of debt-oriented development mutual funds to 12 months from current 36 months for it to qualify as a extended-term capital asset.
LTCG incentives on true estate: Long Term Capital Gains price on true estate assets must be decreased from 20 per cent to 10 per cent and holding period must be decreased from 24 months to 12 months.