Approximately 2400 years ago, well-known Indian polymath Chanakya advocated that “governments should collect taxes like a honeybee, which sucks just the right amount of honey from the flower without causing any harm”.

 

No doubt that a taxpayer’s mind and perseverance is being tested by the pandemic over the last two years thereby leaving an element of uncertainty. In addition to this, the Income Tax Portal 2.0, with its glitches and limitations in the filing forms, rectifications, etc. has dissatisfied taxpayers on the user experience.

 

With this background when the Budget is around the corner, it is natural for taxpayers to set their expectations high. Broadly, they will be looking forward to a Budget that provides them with tax sops primarily aimed at reducing their tax bill and to increase their spendable income.

 

 

 

Top on the list of the taxpayers is a hike in the basic exemption limit from the current level of INR 250,000. The basic exemption limit was last increased in Budget 2014-15 and has remained constant since then, despite a new tax regime being introduced. Increasing the basic exemption limit can incentivize people to spend more and boost consumption in the economy.

 

Considering the current pandemic situation, majority of salaried taxpayers continue to work from home. A hike in standard deduction is expected to provide relief to taxpayers who are incurring additional expenditure in the form of hygiene, well-being, additional electricity, etc. due to the current work-from-home situation. In fact, many countries are offering special tax deduction/exemption for employees working from home and incurring additional expenditures as stated above.

 

The highest slab rate for an individual taxpayer is currently pegged at 42.774% which is way too high when compared to the corporate tax rate. To align the individual tax rates with corporate tax rate, it is hoped that the highest tax slab rates be reduced from 30% to 25% and the slab base be increased from INR 10,00,000 to INR 20,00,000 for 30% tax rate applicability.

 

 

The pandemic has proved that medical insurance coverage is inadequate for families as they have been incurring huge medical expenditures for the treatment of family members. The pandemic has also led to insurance companies raising premium costs with new insurance categories introduced for Covid claims. An increase in the deduction for mediclaim coverage besides giving an additional deduction for medical expenditure, will provide the much-needed relief.

 

 

Section 80C accounts for as many as 25 investments and expenditures including some of prominent investments i.e., life insurance, housing loan principal payment, NSC, Tax Saving Mutual Funds, NSC, PF, PPF, Children Tuition fees, etc. with an aggregate monetary limit of INR 1.5 lakh eligible for deduction. This limit was last increased during the FY 2014-15. An increase in Section 80C limit will not only encourage individuals to save more but also reap benefits for better returns and retirement corpus to help achieve financial security.

 

 

While India has witnessed a surge in cryptocurrency trading activity, it is crucial that their tax position is clarified without any uncertainty.

 

Typically, for an individual selling cryptocurrency, the resultant income could be either business income or capital gains. It is expected that this Budget should provide proper guidance on taxability. It is also equally important to clarify the disclosure requirements in the tax return. This will help in ensuring proper compliance and might increase tax collections. It would also be a good idea to reduce the overall tax rates as stated in the preceding para, and tax income from cryptocurrencies at higher rates!!

 

 

Currently, the deadline for filing revised tax return is 31 December. Individuals with income from outside India will need the tax return of other country for claiming Foreign Tax Credit (FTC) in India for the income which is taxed in both the countries. Considering the difference in tax year in different countries i.e., countries such as USA, Singapore, Canada, etc. and varied tax filing timelines in various countries, an extension in time limit for filing revised tax return will help individuals claim appropriate FTC.

 

While the wish list of individual taxpayers may be never-ending, implementation of some tax benefits discussed above would certainly cheer them. As individuals continue to contribute significantly to the tax kitty of the government, tax measures in their favour would stimulate sentiments!