Budget 2021: Will FM Sitharaman Extend Relief To Covid-Hit Middleclass Taxpayers? Here's What To Expect

This year's Budget may have sops announced earlier under the Atmanirbhar Bharat package to help people in their fight against the Covid-19 pandemic.

(File Photo/ Getty)

New Delhi: As Finance Minister Nirmala Sitharaman is all set to present Union Budget 2020-21 next month, all eyes will be on how Modi government extend relief to lakhs and lakhs of tax-payers of the country, who are already reeling under severe financial strains due to the Coronavirus-induced lockdown imposed last year. Experts believe that the Finance Minister is most likely to bring bunch of cheer for middle class tax payers. As the government is in process of announcing its annual expenditure plan for 2020-21 fiscal, taxpayers of the country expect it to extend some tax benefits as a part of Centre's plan to boost the economy and review growth and demand. While several economic pundits and experts have sent recommendations to the Finance Ministry for providing relief to the taxpayers, sources said that this year's Budget may have sops announced earlier under the Atmanirbhar Bharat package to help people in their fight against the Covid-19 pandemic. A report by news agency IANS quoted its source saying that the Finance Minister is expected to raise the basic tax exemption limit for an individual income tax payee to Rs 5 lakh from Rs 2.50 lakh at present to enhance net disposable income in the hands of taxpayers. In the interim Budget of 2019, the government had proposed a rebate on all payable taxes if an individual's taxable income is up to Rs 5 lakh per annum. However, it kept the basic exemption levels unchanged. The basic exemption limit remain unchanged even though the government brought in new options tax regime with lower rates and exemptions and also gave taxpayers an option to chose between the existing and new tax regimes. While the proposal to raise the basic tax exemption limit for individuals has come from different quarters, sources said that the Department of Revenue will take a call on its after examining the tax implications. Apart from tax exemptions, the Finance Ministry is also exploring possibilities to increase in the level of standard deduction that is currently fixed at Rs 50,000. This will most likely provide relief to tax payers as medical reimbursement and travel allowance exemption were done away with from Financial Year 2018-19 in lieu of the standard deduction. Sources said that while the level of deduction has not been worked out, if accepted, it may go up to Rs 75,000-Rs 1,00,000 based on various pre-budget recommendations given to the Finance Ministry. Standard deductions ensure that all taxpayers have at least some income that is not subject to income tax. These generally increase each year due to inflation. The report also stated that several government finances, that are contrained by lower growth in tax collections, is expected to be augmented in a big way through disinvestment and higher dividend receipts from the Reserve Bank of India (RBI). Meanwhile, several business sectors including manufacturing healthcare, agriculture, infrastructure and housing are expected to get a big push in the Union Budget 2021-22 as the country focuses on ways to reverse the Covid-19 induced economic slowdown.