A final outcome may not be known for several days if the results are as close as opinion polls suggest
americas52 minutes ago
India’s Union Budget will be presented on February 1. India’s economy is still reeling under the impact of the novel coronavirus disease (Covid-19) impact. All eyes are on India’s Finance Minister Nirmala Sitharaman, who will present the Union Budget 2021. This is the most awaited budget amid Covid-19 and Indians, including non-resident Indians (NRIs), are eagerly waiting for this budget. Earlier, Nirmala Sitharaman’s announcement that the budget would be like no other has created a lot of anticipation. The following are the expectations from this year’s budget:
NRIs’ expectations
NRIs play an important part in building the country’s economy. They expect the forthcoming budget will offer sops such as ease of compliance under the Income Tax (I-T) Act, 1961 and reduction in withholding tax rates, among other relaxations. According to a 2018 World Bank Report, NRIs remitted $80 billion to the country and account for substantial part of the country’s economic growth.
Extension of relief for stranded NRIs
The government had announced relaxation in relation to stay in India for determining residential status for financial year (FY) 2019-20 for individuals based in India who had come on a visit to the country but had to prolong their respective stays due to travel restrictions due to Covid-19 pandemic. Considering the travel restrictions and suspension of international flights have been extended into FY 2020-2021, the government could announce similar relaxation for FY 20-21 as well.
Taxes on foreign cash remittances
In February 2020, the Indian government came up with lot of crucial changes and one of the major tweaks was the introduction of tax at the rate of 5 per cent on overseas remittances, under a plan termed as the ‘Liberalised Remittance Scheme’ (LRS) over and above remittance of ₹700,000 annually. The threshold of ₹700,000 should be increased substantially for spends on medical treatment, maintenance of relatives abroad, foreign education, investment in real estate etc. Alternatively, the Narendra Modi-led administration might think to reduce the Tax Collected Source (TCS) on such remittances.
Increase in basic income tax exemption
The basic I-T exemption limit needs to be increased from ₹250,000 to ₹500,000. 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. The deduction limit under section 80C of Act for specified tax-saving investments which is currently ₹150,000 should be increased to ₹250,500.
Expanding the scope of Section 80D:
Every individual or HUF can claim a deduction under Section 80D for their medical insurance which is taken from their total income in any given year up to ₹100,000 over and above the deductions claimed under section 80C/CCC/CCD. The pandemic has not only underlined the need for health insurance, but also shown that the cover should be big enough. To encourage taxpayers to take adequate health insurance cover, the quantum of deduction for health insurance premium under Section 80D should be raised.
Tax breaks on new additional expenses
There are several additional expenses that employees have to incur due to work from home (WFH) such as high electricity, phone, internet bills etc. WFH may feel lighter on our pockets without the cost of a daily commute or leisure travel. But we may have to shell out more on the tax liability later for the FY 2020-21. As professionals work from home, salary components such as conveyance allowance can no longer be tax-free and shall be added to the taxable income. The government could look at providing deductions for expenses incurred by salaried employees while working from home in the upcoming Budget. For example, a standard deduction of ₹50,000 from gross income could be provided to allow for expenditure by employees who are working from home on ergonomic chairs/furniture, computer equipment, data cards, etc.
Removal/ reduction of taxability on long-term capital gains (LTCG)
The LTCG tax was introduced in 2018 at 10 per cent. In the current scenario, in order to provide an impetus to the investment in the Indian securities, the government should consider rolling back the tax on LTCG. Alternatively, the government can consider reducing the taxability of LTCG from 10 per cent to 5 per cent, which will make the returns more lucrative.
Chirag Agarwal is the founder and MD at Earningo Accounting & Tax Consultancy. Views expressed here are his own and do not reflect on this newspaper’s policy
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