Bhubaneswar: With the country wrestling out of the ‘once in a lifetime’ pandemic, every stakeholder – from common man, salaried class to corporates – have a high order of hopes from the third budget of Finance Minister Nirmala Sitharaman.
Since the Budget is coming after a very critical period, will Sitharaman have the elbow room to manoeuvre?
The clue: Sitharaman’s ‘Shayari’ in her maiden budget in 2019.
'Yakeen Ho To Koi Raasta Niklata Hai, Hawa Ki Ot Bhi Le Kar Charagh Jalta Hai'
(Meaning: If you believe in yourself, you can find a way just as an earthen lamp can also lighten up despite the wind blowing around).
The 2021 Budget will take a reality check of her 2019 Shayari.
Will the Budget give wings to the hopes, aspirations and relief for the middle class (salaried class)? Will the IT exemption limit will be raised from Rs 2.5 lakhs to Rs 5 lakhs?
“A cloud is a promise…fulfilment is rain….” So goes an Arabian proverb.
Wait for the B-Day… But Some Clues To Pick Up The Early Wind…
2021 TAX RELIEF: A PENNY OR POUND?
The Economic Survey 2021 has dropped enough hints.
It had yesterday indicated how the discretionary spending was down following the Covid-19 pandemic in the country.
But in the same vein, the survey had also talked about increasing the disposable income at the hand to give an impetus to the demand side of the economy to spur up the supply side.
The approach of the upcoming Budget, therefore, will be to increase the disposable income at hand, and the Budget may definitely roll out some tax reliefs for the salaried and middle class.
But How Much And In What Format?
As per ICICI Direct’s curtain raiser on the Budget 2021, the report feels that the Budget may bring some relief in the realm of personal income tax for the middle class. But the exemption limit is unlikely to be raised to Rs 5 lakhs, as demanded by the salaried class in the country.
However, the economists in the ICICI Direct report see reliefs in the form of tax slabs and tax deductions under section 80 C finding a place in Sitharaman’s Budget Speech on Direct Tax.
♣Since the ‘new tax regime’ introduced in the previous budget as an option was not beneficial for higher income slab assesses as it warranted to forgo most of the exemptions like standard deduction, section 80C deductions, interest on housing loan, HRA, LTA, medical insurance, NPS contribution etc.
To encourage shifting to the ‘new regime’, higher income tax slab rates may be reduced from 30 per cent to 25 per cent, which will also bring it in parity with corporate tax rate. Also, the tax slabs (slab at every 5%) may be reduced to just10%, 20%, 30% to further simplify the new regime,” the report predicts.
(See the image below for details)
♣The report further forecasts that the Budget 2021 will raise the limit u/s 80 C. It thinks the budget may increase the limit to Rs2.0 lakh from Rs1.5 lakh. The reason: It has not been increased in the last five years.
What is 80 C?
You can claim a deduction of Rs 1.5 lakh of your total income under section 80C – Investments in Provident Funds such as EPF, PPF, payment made towards life insurance premiums, Equity Linked Saving Schemes, payment made towards the principal sum of a home loan, Sukanya Sammridhi Yojana, National Saving Certificate, Senior Citizen Saving Scheme, etc.
In simple terms, you can reduce up to Rs 1, 50,000 from your total taxable income, and it is available for only individuals and Hindu Undivided Families.
OTHER TAX RELIEFS
♣As per the report, to promote housing demand, the government may consider enhancing the current limit of deduction for interest on housing loan on self-occupied properties to Rs3lakh from the existing Rs2lakh.