There are lot of expectations from Budget 2021 as it might be offered amid the COVID-19 pandemic which has triggered important disruption in the lives of many in addition to severely impacted the economic system.
The Finance Bill (popularly referred to as Budget) for the monetary 12 months beginning 1 April 2021 can be offered on 1 February 2021. As particular person taxpayers, most of us eagerly wait for the Budget because it lists down proposals which might influence the taxability of income for the following monetary 12 months. Changes proposed by the Budget, as soon as permitted, have the potential to increase or lower one’s put up-tax income.
There are lot of expectations from Budget 2021 as it might be offered amid the COVID-19 pandemic which has triggered important disruption in the lives of many in addition to severely impacted the economic system. On the personal tax entrance,
among the expectations from the Budget are:
Simplification of tax legal guidelines and ease of compliance: The authorities has constantly moved in direction of theprocess of simplification of tax guidelines and ease of compliance in the previous couple of years. Various steps have been taken in the current previous to simplify compliances and provide higher taxpayer expertise resembling faceless assessments/appeals/penalty, issuance of refund electronically, Taxpayers’ Charter and so on. This Budget is predicted to take the journey ahead by bringing additional simplification in among the compliance necessities/processes.
Deduction for medical expenditure for all: As per the present tax legal guidelines, deduction for medical bills (upto Rs 50,000) is on the market solely for bills incurred on or by senior residents who don’t have medical insurance. Considering the hovering medical bills, particularly on account of COVID-19 , the Budget should introduce such deduction for all who shouldn’t have medical insurance.
Incentivising buy of inexpensive housing/electrical automobiles (EV): Currently, for first-time house patrons, an extra deduction of as much as Rs 1,50,000 is allowed in respect of curiosity paid on mortgage to buy a residential home property, if sure circumstances are met. This is in addition to the deduction of Rs 2,00,000 which is on the market for curiosity paid on housing mortgage. Also, patrons of EV can profit from a deduction of upto Rs 1,50,000 for curiosity paid on loans to purchase EV, topic to sure circumstances. Amendments should be introduced
to incentive buy of such property even the place a mortgage will not be availed.
Legislative amendments for Leave Travel Concession Cash Voucher (LTC) Scheme: Due to COVID-19 pandemic, salaried workers had been unable to journey and declare tax exemption on go away journey allowance. To deal with this and incentivise consumption, the federal government launched an modern LTC scheme for salaried workers. The scheme supplies tax exemption for bills incurred on buy of eligible items and companies (topic to specified circumstances). The legislative amendments are but to be issued in this regard and are anticipated to be addressed in the Budget. Also, the LTC Scheme might be prolonged past 31 March 2021 to spice up consumption.
Introduction of the deduction for funding in Infrastructure bonds: Infrastructure bonds usually provide lengthy-time period liquidity to the issuer. Considering the large spending wants for financial restoration, these bonds may assist the federal government with quick liquidity. For people investing in such bonds, tax deduction might be supplied (upto specified restrict) which might make investments in these bonds extra engaging.
While offering reliefs and deductions for taxpayers is one side of the Budget, the federal government additionally has to fulfil its income wants to deal with the COVID-19 pandemic and speed up progress. Some of the methods in which this
might be achieved are:
Enhancing LTCG tax charge on the sale of property: The tax charge relevant at current on Long-Term Capital Gains (LTCG) arising from the sale of a property is 20 p.c. Such LTCG could also be topic to tax at greater rates or at regular slab rates for people who personal greater than two home properties.
Imposition of COVID Cess for high-income earners: The authorities might levy a particular one-time cess on taxpayers falling in the 30 p.c slab charge to garner sources for assembly the elevated authorities spending on account of COVID.
There should be extraordinary measures for extraordinary instances such because the COVID-19 pandemic. Hopefully, Budget 2021 will convey modifications conserving in thoughts the wants and aspirations of the nation in addition to its residents.
The author is Tax Partner – People Advisory Services, EY India. Ankur Agrawal, senior tax skilled, EY India additionally contributed to this text.
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