The challenges before Finance Minister Nirmala Sitharaman as she prepares to present the Union Budget for 2021-22 are all too well known. The nation is just about emerging from a year of economic contraction, business shutdowns, and job and income losses, all brought on by the Covid-19 pandemic. Measures are needed to accelerate growth, create more jobs, increase household incomes, boost investment and consumption and nurse the economy back to health.
At this unprecedented economic juncture, here is what the middle-class taxpayer expects from the Finance Minister:
– The government could look at providing deductions for expenses incurred by salaried employees while working from home in the upcoming Budget as it looks forward to boosting demand.
– In order to provide relief to salaried middle-class taxpayers amid a global pandemic, the central government should consider hiking the standard deduction limit in the upcoming Budget 2021. The standard deduction is a fixed deduction that is allowed to specific income tax assessees, irrespective of expenses incurred or investments made. Introduced in the 2018-19 Budget, the standard deduction replaced the medical and transport allowance. At that time, a salaried individual or pensioner could claim a standard deduction of up to Rs 40,000 from their income. It was further increased to Rs 50,000 in the following Budget.
– Deduction of Rs 1.50 lakh for repayment of principal on home loan should be provided under separate section and should not be clubbed under section 80C as the qualifying amount of Rs 1.50 lakh is already exhausted in most cases (Also, the deduction should be allowed from the year in which loan is availed and not from the year in which possession is taken).
– Under Section 80C, an individual is eligible to claim tax deductions of up to Rs 1.5 lakh on various payments including life insurance premiums, principal payment of the home loan, fixed deposits, provident funds, etc. Considering the inflation in the recent past, the government may increase this upper limit to up to Rs 2.5-3 lakh. The rise in the exemption limit will encourage people to spend more on tax-saving instruments backed by the government.
– The global pandemic has shown us that a health insurance product is a necessity, not an option anymore. In order to protect lives, the need for insurance has significantly increased. Several companies have made health insurance cover mandatory for their employees. In view of this situation, the government may increase the upper limit on health insurance premiums under Section 80D.
Courtesy – MSN