Budget 2021 Taxpayer Expectations: Know What A Common Man Is Eyeing In This Budget

Budget 2021 Income Tax, Common Man Expectation: From increase in tax slab to higher deductions, here are some expectations from the Budget to be presented on February 1.

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Budget 2021 Taxpayer Expectations: With the common man bearing the brunt of Covid-19 in 2020, now all eyes are set on the annual budget to be presented by finance minister Nirmala Sitharaman on February 1, 2021. This year the budget will be paperless for the first time in history. This year is different as the country is overcoming one of the toughest economic situations owing to pandemics, and people have now pinned all hopes on the budget looking for some relief. Ahead of the Budget session of the Parliament, mandatory RT-PCR tests will be done on all the members and the question hour is set to make a comeback. Also Read: Budget 2021 Expectations: From Affordable Housing To GST Reforms, 5 Demands Of Real Estate Industry

The Budget session is scheduled to begin on January 29, 2021.

What are the expectations of the common man?

Increase in tax slab

Every year, salaried individuals look forward to changes in the income tax bracket and the increase in the tax bracket is something that people are expecting this year. Some experts believe the newly introduced tax slabs with conditions don’t seem to be workable for many taxpayers. Salaried individuals are feeling the heat of the inflation on the higher side, and less likelihood of rising in the income of salaried individuals in the coming financial year. The increase in tax slab limit can offer some relief to the common man by giving them more disposable income which in turn will help spur consumption.

The current tax slabs are NIL for those earning between Rs 0-2,50,000: 

5 percent for income between Rs 2.5-5 lakh (Total income minus Rs 2,50,000)

Rs 5 lakh-Rs 7.5 lakh - Rs 12,500 + 10% of total income exceeding Rs 5 lakh

Rs 7.5 lakh to Rs 10 lakh - Rs 37,500 + 15% of total income exceeding Rs 7.5 lakh

Rs 10 lakh to Rs 12.5 lakh - Rs 75,000 + 20% of total income exceeding Rs 10 lakh

Rs 12.5 lakh to Rs 15 lakh - Rs 12,5000 + 25% of total income exceeding Rs 12.5 lakh 

Those earning above Rs 15,00, 000 - Rs 1,87,500 + 30% of total income exceeding Rs 15 lakh 

Higher tax deduction

With regard to a tax rebate, a higher deduction under Section 80C to avail tax deduction can aid salaried taxpayers to save and make a long-term investment. Besides additional tax benefit for new home buyers during the coming financial year in the form of higher tax rebate on interest repayment can also help those salaried individuals looking to buy a home.

Most believe that the FM should consider increasing the additional deduction limit for individuals from ₹ 50,000 to ₹ 100,000 or ₹ 150,000 in regard to NPS.

At present under Section 80C, the limit of ₹ 150,000 for deduction is not enough and more deduction can help people to save tax and encourage long-term investing. Also, some believe that making it EEE (Exempt Exempt Exempt) from a taxation perspective will also offer a huge relief.

With the ongoing pandemic, people have realized the need to cover medical expenses. It is only rising every year and need for higher health insurance is extremely critical. A higher exemption limit under Section 80D for the health insurance premium will bring relief on tax as well as encourage people to opt for adequate health cover. 

What’s likely to be on the table?

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 remains unchanged even though the government brought in new options tax regime with lower rates and exemptions and also gave taxpayers an option to choose between the existing and new tax regimes.