The outbreak of COVID-19 pandemic in March 2020 in some ways compelled organisations to implement do business from home coverage for his or her staff throughout the lockdown interval and put up thereto
With the Union Budget 2021-22 on the anvil, akin to previous years, a typical man hinges his hopes of getting extra money at his disposal to spend/save as he needs. Especially, contemplating the current hardships and challenges attributable to COVID-19 pandemic on taxpayers’ livelihood and total financial system, the federal government could consider how they will improve the frequent man’s buying energy.
The want record on the non-public tax entrance are as below:
Separate deduction for COVID-19 remedy
Currently, few deductions have been prescribed below Chapter VI-A of the Income-tax Act, 1961 (the Act) for medical remedy for self or dependent affected by incapacity/extreme incapacity (Section 80DD, 80U of the Act), medical remedy of prescribed illnesses and illnesses (Section 80DDB of the Act). However, for these not coated below any medical insurance, no explicit deduction has been prescribed below the Act protecting the remedy value for COVID-19 .
Donation made to PM CARES fund designed particularly for offering COVID-19 relief is eligible for 100 % deduction u/s 80G of the Act, however no corresponding deduction has been notified for bills incurred on remedy of the illness itself.
In order to present a lot-wanted relief to the taxpayers, particularly those not coated below a medical insurance coverage, a separate deduction capped up to Rs 1,00,000 or precise remedy value incurred by the taxpayer for self or household, whichever is decrease could also be launched below the Act given the substantial value concerned in COVID-19 remedy in authorities or non-public hospitals.
Provision for furnishings by employer
The outbreak of COVID-19 pandemic in March 2020 in some ways compelled organisations to implement do business from home (WFH) coverage for his or her staff throughout the lockdown interval and put up thereto. During such WFH scenario, a number of firms endeavoured to put in place obligatory enabling infrastructure by way of provision of furnishings (like tables, ergonomic chairs, and so forth.), excessive-velocity web, printers, desktops, stationery, and so forth. for ease of working at their staff’ residences to guarantee conducive work atmosphere.
Some firms determined to grant a set allowance to staff to meet the expenditure on such furnishings/different gadgets, whereas others determined to present reimbursement. While each the allowances and reimbursements are necessitated by the enterprise requirement, these advantages have the potential of being taxed in the palms of the staff as a prerequisite.
As this case has not been expressly handled in the Act or the Rules made thereunder coupled with a indisputable fact that WFH on a big scale seems to be a protracted-time period norm now, some tax relief particular to do business from home scenario could also be offered to individual taxpayers and their employers.
Realignment of earnings slabs/tax charges
The exemption restrict for individual taxpayers under 60 years of age amounting to Rs 2.5 lakh each year has remained fixed from Financial Year (FY) 2014-15. Some relief was offered to taxpayers by Union Budget 2020-21 whereby various elective new tax regime was launched which allowed the taxpayers to select between the present tax regime and new tax regime whichever is extra useful given their tax scenario. By choosing such new tax regime, a bunch of exemptions/deductions have been to be foregone by the taxpayer.
While the brand new tax regime had decrease tax charges, the final word profit to the taxpayer was the idea of the deductions/ exemptions in any other case he/she was eligible to. Hence, with the target of simplifying this additional and enhancing the web disposable earnings, it might be thought of whether or not the essential exemption restrict below the present tax regime will be enhanced to Rs 5 lakh itself. This would additionally want to be assessed foundation the potential variety of taxpayers who could fall out of necessary tax return submitting requirement. Subsequently, the opposite slab charges each below the present and new regime will be adjusted foundation the revised limits in line with the progressive tax charge system India has all the time adopted.
Housing tax breaks
To reignite the momentum in the actual property sector, the federal government could assess enhancing the usual deduction of 30 % of Net Annual Value to 50 % and/or enhancing the present restrict of deduction for curiosity payable on housing mortgage on self-occupied properties to Rs four lakh each year.
Increase in deduction u/s 80C
The restrict of Rs 1.5 lakh in respect of deduction below Section 80C of the Act for numerous frequent tax-saving investments/expenditure (resembling worker provident fund, public provident fund, principal compensation of housing mortgage, youngsters tuition price, nationwide financial savings certificates, and so forth.) has remained fixed for nearly half a decade now. Given the present financial scenario, the federal government would love to present impetus to demand and consumption. With this in thoughts, if people are inspired to spend on bills like college charges, housing and so forth. the federal government could therefore consider rising this to Rs three lakh each year. Alternatively, a separate deduction could also be launched (in addition to the proposed enhanced restrict) for sure excessive-worth transactions resembling youngsters’s tuition price (maintaining in thoughts the spiralling schooling value over previous few years), expenditure on particular gadgets made in India, and so forth.
Though expectations of a typical man on private taxes will be widespread, sustaining fiscal self-discipline whereas offering impetus to greater financial progress can be an unenviable activity for the finance minister to carry out particularly in these unprecedented instances. Thus, it might be attention-grabbing to see what private tax reforms are launched in the Budget 2021 on this entrance.
The author is Partner and Head, Global Mobility Services-Tax, KPMG in India
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