After the financial downturn as a consequence of COVID-19, Finance Minister- Nirmala Sitharaman has raised many hopes for everybody earlier than presenting the 2021 Budget, on February 1. This time, the Union Budget will likely be essential for everybody as a result of of the COVID-19 pandemic chaos which occurred within the life of everybody. During this pandemic, many individuals not in India however around the globe went by means of monetary disaster as a consequence of wage cuts, job losses, loss in companies which led them to hold the burden of the monetary disaster. This is the explanation everyone seems to be anticipating one thing massive from the Finance Minister with a hope to reducing tax cuts together with decreasing different pandemic burdens. It is probably going that FM might announce some massive modifications within the tax slab charges however the Wish record of a common man contains nice expectations.
Personal Tax and Deductions Under Income Tax Section 80C:
To scale back the private tax burden, tax consultants recommend elevating the tax exemption restrict from 2.5 lakh to five lakh for regular particular person, for senior citizen the tax exemption needs to be from Rs. 3 to six lakh and for tremendous senior citizen it needs to be Rs.5 to eight lakh. The tax exemption restrict revisions are a lot wanted, as elevating tax exemption restrict will little question increase the revenue in palms of any common man.
It is predicted that to scale back the burden of tax, FM might increase the tax slab charges each for the brand new slab and the outdated slab regime. Also, customary deduction beneath 80C might enhance from 1.5 lakh to three lakh.
According to Sanjiv Bajaj, Joint Chairman & MD, Bajaj Capital- “On the contrary, the common man expects the increase in the Section 80 C limit from Rs 1.5 lakh to at least Rs 3 lakh to save for long term goals and save tax. A separate limit for life insurance should also be considered by the government to ensure individuals have their protection needs met adequately. This is very important given the fact that importance of having good insurance protection and government needs to encourage that”.
Financial consultants anticipate the 80C restrict of the revenue tax is a extremely used deduction restrict for taxpayers, which they assume is insufficient and it’s the proper time for the finance ministry to lift the 80C restrict. This will improve the taxpayers to avoid wasting an increasing number of detached funding choices like PPF, NSC, NPS, ELSS, Bank FDs and so on…
According to Adhil Shetty, CEO, Bankbazaar.com: “A higher 80C limit, combined with new tax deductions for life insurance and home loan payments, would not only encourage more people to take home loans and term insurance, but also motivate them to invest more in government schemes such as Employees Provident Fund and Public Provident Fund. This would put much more money in government coffers while also providing conservative investors viable options during economic turmoil caused by the pandemic.”
New Section for Home Loan Tax Deductions:
The Government should contemplate a single new part beneath the Income Tax Act that gives a complete deduction of Rs. 5 lakh each year for residence mortgage principal and curiosity funds.
Taxpayers with residence mortgage additionally foresee one thing massive from this 2021 Budget. Common man awaits from the federal government to think about a single new part for residence mortgage tax deductions of Rs. 5 Lakh (principal and curiosity cost). The tax deductions on residence mortgage would encourage the brand new homebuyers and residential possession.
“Costs of homeownership are extremely high in urban areas, requiring the purchasers to take large home loans which strain their incomes, limit their savings, and reduce disposable incomes. Higher tax benefits will help homeowners enjoy higher disposable income through lower taxation” provides Shetty.
Apart from, Section 80C tax customary deduction (1.5Lakh), a separate part for residence mortgage funds would on the very least assist taxpayers to get larger deductions for bills they can not avert as a result of excessive prices of homeownership.
Tax deductions must be simplified to profit all home-owning taxpayers. Currently, householders get deductions beneath 80C, 24b, 80EE and 80EEA. These needs to be clubbed right into a single tax part targeted solely on residence mortgage funds–each curiosity and principal.
Health and Term Insurance premium:
Due to the worldwide pandemic, folks all around the world are present process by means of monetary and medical disaster. Also, as a consequence of COVID-19, Medical bills in India soared up together with the necessity of medical health insurance. People have began securing their well being by taking good medical health insurance plans, which has instantly elevated the quantity of insurance coverage policyholders in India. With assist of Income Tax Section 80D a person can declare upto Rs. 1 Lakh on the medical health insurance premium (when procured for household). Which for a person with dependents just isn’t sufficient?
It is essential for individuals with dependents to personal time period insurance coverage.
To encourage extra folks to personal time period insurance coverage, it could be advisable to introduce a brand new part offering deductions for time period insurance coverage premiums. Individuals are wishing from the Budget 2021 to do a separate deduction for time period insurance coverage premiums of Rs. 25000.
“It’s important to provide taxpayers full value for their various essential expenses such as insurance premiums. The limit of Rs. 1.5 lakh under 80C is inadequate, especially for people with complex expenses, dependents, and financial liabilities. Therefore, it would be a good start to remove life insurance premiums from 80C to a new section” opines Shetty.
Naveen Kukreja, CEO & Co-founder, Paisabazaar.com says: “Budget 2021 must also announce a separate deduction for time period insurance coverage premiums to incentivize shoppers to purchase sufficient life insurance coverage covers. Term insurance coverage insurance policies enable shoppers to purchase giant life covers at a lot decrease premiums than different insurance coverage merchandise.”
“The government should consider offering an innovative solution to the common man by incentivizing first-time buyers of health insurance, term insurance, and NPS to avail additional tax benefits of up to Rs 1 lakh. The modalities of such a scheme may be worked out by the government that will ensure social security measures of the population in a cost-effective way” provides, Bajaj.
Term insurance coverage is each a primary want in monetary planning and comparatively low cost. If separate tax deductions are being offered for time period insurance coverage, extra folks will contemplate it over conventional types of life insurance coverage that are costlier however provide insufficient life cowl.
Some More Budget Expectations:
- Although, the monetary well being disaster of 2020 has pushed the federal government to provoke a slew of measures to maintain the financial system, within the kind of insurance policies and packages. Further, the federal government within the upcoming funds might deal with, inter-alia, imposing COVID-cess on HNIs or firms to bridge the estimated funds deficits.
- To enhance, post-retirement safety among the many salaried class, the tax deduction accessible by means of Section 80CCD(1B) must also be prolonged to investments made in pension plans supplied by life insurance coverage firms and mutual fund homes.
- The NPS Tier-II Tax Saver Scheme introduced in Budget 2020 for central authorities staff has a lock-in interval of simply 3 years and a hard and fast asset allocation of 10-25% for equities and the remainder in debt devices. This 12 months’s Budget ought to open this tax saving scheme to self-employed and salaried people working with State Governments and personal sector.
- ESOPs are the nice supply for an worker to generate wealth, so higher tax remedy for Employee Stock Option Plans (ESOPs) is required. “The taxation on ESOPs during the point of exercise should be done away with and tax should be levied only on the sale proceeds. This would ensure tax is levied only when the employee makes a profit when selling the allotted shares and not as a perquisite” provides Shetty.
- Budget 2021 ought to increase demand within the reasonably priced housing section by making Section 80EEA a everlasting characteristic or at the very least extending it to the following monetary 12 months. Section 80EEA gives a further deduction of Rs 1.5 lakhs on residence mortgage curiosity compensation to first time residence consumers for buying housing models of stamp responsibility worth of as much as Rs 45 lakhs. This deduction is over and above the Rs 2 lakhs deduction on residence mortgage curiosity compensation beneath Section 24b.
- Increase 80TTA restrict to Rs.30,000: The present tax deduction restrict of Rs. 10,000 on the curiosity revenue from financial savings account in banks, co-operative banks, and put up workplaces beneath Section 80TTA of the I-T Act must be elevated to Rs. 30,000. This would encourage extra folks to maintain their financial savings with banks as an alternative of maintaining money at their properties bringing in additional transparency, accountability, and safety of financial savings.
- Work from residence (WFH) can be a brand new regular after COVID-19 and so many companies have began the WFH coverage from the final one 12 months. Experts recommend the federal government to introduce some help for wage drawing staff to assist their additional allowances whereas doing work at home.