All eyes are on Finance Minister Nirmala Sitharaman as she will be presenting the Union Budget 2021 today, i.e., February 1. There is more interest and expectations this year from the budget due to the novel coronavirus pandemic and the impact it has had on various segments of the economy.For the salaried class, the year 2020 was marred with job loss, pay cuts, higher inflation and so on. That is why many are hoping for announcements that can at least help ease their tax burden. Here is a list of some of the expectations of the common man from the Union Budget 2021. Hike in tax exemption limitTop on the wish list of the salaried class is a hike in the basic exemption limit from the current level of Rs 2.5 lakh. The last time tax exemption limit was hiked was in Budget 2014-15. Though Sitharaman announced a new tax regime in last year's budget which offered lower tax rates, however, no changes were made in the tax exemption limit. By hiking the tax exemption limit, the government can incentivise people to spend more and boost consumption in the economy.Homi Mistry, Tax Partner, Deloitte India says, "The immediate expectation is to reduce the tax burden of taxpayers. The Covid-19 pandemic has affected everyone in some way or the other. Increasing the basic exemption limit will provide tax respite to individuals, increase liquidity, and give a boost to the economy."Hike in deduction allowed on health insurance premium paidThanks to the pandemic, many of us have become aware of the importance of health insurance and the role it can play in protecting our finances in case of a medical emergency. At present, income tax laws offer tax benefit on the health insurance premium paid.An individual can claim a deduction of Rs 25,000 for health insurance premium paid for self, spouse and dependant children. Additional deduction of Rs 50,000 is available for health insurance premium paid for parents. However, there is a need to hike the deduction amount available on the health insurance premium paid so that an individual can buy adequate medical coverage for their family.Surabhi Marwah, Partner-People Advisory Services, EY India says, "The limits currently prescribed (Rs 25,000 to Rs 100,000 which depend primarily on the age of the individual and the coverage of family members) under section 80D are not in-line with the likely expense that an individual may incur. It is an ask that the overall limit be increased to reflect the on-ground reality."Leave Travel Concession (LTC) Cash Voucher SchemeIn October of 2020, the government announced the LTC Cash Voucher Scheme to provide a tax benefit to individuals and also to boost consumption in the economy. The last date to avail the benefit under the scheme is March 31, 2021. As per tax experts, the government should extend the last date of the scheme as it is likely that many people would have postponed their travel plans to 2021 due to Covid-19 restrictions in 2020. Further, the government should lower the minimum spending amount to make the scheme more attractive. As per scheme guidelines, following conditions must be satisfied to be eligible under the scheme:a) Spend three times of the deemed LTC fare on the goods/services attracting GST of 12% or above;b) Expenditure must be made between October 12, 2020, and March 31, 2021;c) Payment must be made via digital mode;d) Invoices must be submitted to an employer containing GST number of the vendor along with the GST amount paid.Mistry says, "Spending three times the value of LTC fare seems high. Therefore, the government may consider reducing the spending required to twice the value of LTC fare. Also, an extension of the scheme for an additional nine months, i.e., up to December 31, 2021 (till the end of the block period of 2018-2021) may be considered."Relaxation in residency criteria for NRI for FY 2020-21Due to coronavirus-related travel restrictions, many non-resident Indians (NRI) have been stranded in India. As the stay of many NRIs would have exceeded the desired number of days to meet the residency conditions to remain NRI under the income tax laws, relaxation is needed. Further, rules for determining the residency conditions have been changed effective from FY 2020-21. Effective from April 1, 2020, if the total income accrued in India for an NRI exceeds Rs 15 lakh, then in such a case if he/she stays in India for up to 120 days to remain non-resident in India. On the other hand, if the total taxable income accrued in India does not exceed Rs 15 lakh, then he/she can remain non-resident for up to 182 days in India. If the stay in India exceeds the maximum limit mentioned above (depending on the income), then the individual will be classified either as a Resident and Ordinarily Resident (ROR) or Not Ordinarily Resident (NOR), as determined by additional residency conditions.The income tax department has provided similar relaxation for FY 2019-20 via a circular dated May 8, 2020. Mistry says, "Due to the pandemic, the government had notified exemption of certain days for determining residency for FY 2019-20 for individuals who were stranded in India on account of the lockdown and who could not travel outside India. For FY 2020-21 also, the government should issue the necessary clarification providing relief for stranded individuals on account of the pandemic."Deduction for work-from-home allowanceAs majority of employees are now working from home due to the coronavirus pandemic, they have to incur expenses such as buying table, chair etc. However, no tax benefits are available on such expenses made by an employee. There is a need to provide tax benefits to such employees for the expenses made for working from home.Mistry says, "Budget 2021 should introduce measures which would provide certain tax benefits for employees. For example, a standard deduction of Rs 50,000 from gross income could be provided (over and above the existing standard deduction from salary) to allow for expenditure by employees who are working from home on ergonomic chairs/furniture, computer equipment, data cards, etc."The above mentioned are few expectations that people want from finance minister in this budget, however, as per tax experts, there are certain announcements that can be seen in the Budget 2021 to raise additional revenue. Sonu Iyer, Tax Partner and National Leader - People Advisory Services, EY India says, "The government could look at introducing a coronavirus cess or surcharge on individual tax payers - possibly only on the higher income groups. The government may also look at increasing the tax on long term capital gains from equity and property, to push up revenue."
from Economic Times https://ift.tt/2MdPdVi
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