Simpler tax regime at Covid deduction: What the common man wants from the 2022 budget
NEW DELHI: The Union Budget 2022 countdown has begun and the common man’s wish list has only grown as the pandemic has brought extreme financial hardship to several people who have lost their jobs, faced pay cuts and spent on health care for themselves and their family members.
While the current tax slabs have not changed for the past seven years, inflation has reduced the purchasing power of money. Yet outright changes in the rates/brackets of direct or indirect taxes (the GST falls under the purview of the GST board) should not be part of the budget. However, amid the third wave of the Covid-19 pandemic and serious concerns about inflation, people are looking for a budget that can help create more jobs, lower commodity prices and improve their livelihoods. overall quality of life.
1 Deduction for life insurance premium, medical insurance & housing allowance under the new tax regime
Currently, the majority of taxpayers are still opting for the old tax system because the tax obligations are more advantageous compared to the new tax system and therefore the compliance burden of filing detailed tax forms still exists.
“To make the new tax system more attractive to taxpayers, the familiar deductions claimed by individual taxpayers, i.e. the deduction for housing allowance, life insurance premium and the medical premium, must be allowed as a deduction when calculating tax according to the new tax regime since these investments are mainly made not to save tax but to cover risks and housing allowance is part of salary structure provided by most employers,” says Maneet Pal Singh, Partner, IP Pasricha and Co.
2. Provide a one-time Covid deduction
Due to Covid-related hospitalization and treatment costs, which may have caused enormous financial pressure on taxpayers in 2021, special one-time deduction of Rs 1 lakh is being requested, says Adhil Shetty – CEO – Bankbazaar. com. Even Archit Gupta of Clear thinks the government could grant a special deduction related to COVID expenses under Section 80D or 80DDB to provide tax relief to COVID-19 patients and their families.
3. Home work allowance:
“The budget can introduce tax-free work from home allowances for salaried employees. Allowing deductions for these expenses will increase take-home pay, ultimately creating demand for goods and services in the country,” said Archit Gupta , CEO of Clear.
Due to the high collection of direct taxes during this financial year, it might be possible to increase the tax deduction limits. For example, the standard deduction available to those with wage income may be increased, currently at Rs.50,000. This can be adjusted for inflation each year. The standard deduction of Rs 40,000 was introduced in 2018 and it was later increased to Rs 50,000 in the 2019 interim budget. The request for a higher standard deduction cap comes at a time when household expenditure has increased due to inflation.
4. Increase in limits under Section 80C Section 80C and Section 80D:
A high collection of direct taxes during this financial year could help to revise these ceilings upwards. A higher deduction under Section 80C may be allowed for the Equity-Linked Savings Scheme (ELSS), or a separate limit may be set to encourage more investment in mutual funds in India.
“The threshold for various allowances and deductions was established many years ago and has remained unchanged. An increase in these thresholds is overdue, for example, the deduction threshold under Section 80C is capped at Rs 1, 5 lakh in 2014 and remains the same same after 8 years.The cap of a few of the allowances such as Child Education Allowance, Transport Allowance etc. has remained unchanged for decades and completely out of step with the current reality of costs in this regard. Similarly, the Rs 2 lakh cap on interest deduction on home loans is impractical in view of rising property prices,” says Rahul Charkha, Partner, Economic Law Practice.
Additionally, there are many taxpayers for whom the Section 80C limit is exhausted with the repayment of their EPF principal and home loan.
5 Deductions for higher education savings: In India, a person generally spends 1/3 of his income on the education of his children. Saving for children’s higher education is therefore an important financial goal for any individual and a portion of income is usually earmarked for such savings.
“Currently, there is no express deduction/exemption for such savings, except for the Sukanya Samriddhi Yojana, which is specifically for a girl. The tax benefits are also not substantial as the deduction is clubbed within the limit of Section 80C of Rs 1.5 lakh per annum.This deduction encompasses various other tax-saving investments/expenses (such as Employees Provident Fund, Government Provident Fund, repayment of principal on a home loan, children’s school fees, National Savings Certificate, etc.), leaving limited leeway to claim the deduction for a higher amount of education savings” , says Anand Chatrath, Managing Partner at BM Chatrath & Co LLP.
Additionally, to encourage millennials to invest in their education, some suggest the budget could incentivize investment in education.
“A new section of investments for education can be earmarked for tax-saving schemes. With no deductions, investments in education can be exempt from long-term capital gains with brakes and checks and balances in place to curb any abuse. Such measures will certainly result in a raise for all players in the economy,” said Sujith Narayanan, co-founder of Fi Neo Bank.
6. Deduction for medical expenses u/s 80D: Section 80D allows a deduction for medical expenses only if they are incurred in connection with the medical treatment of an elderly person not covered by health insurance. In other words, no deduction is allowed if the amount is incurred for medical treatment of:
a) A person who is not an elderly person; Where
b) A person covered by a health insurance policy.
“Although the elderly are more vulnerable to the coronavirus, it has indeed infected and hospitalized people of all age groups,” Chatrath said.
According to Shetty, policy premiums have also increased during the pandemic, which is why he recommends that deductions for non-citizens under 80D be doubled to Rs 50,000 to enable all families to have coverage. higher to protect against hospitalization costs.
Section 80DDB allows the deduction of a certain amount in the event of medical treatment. The section contains a list of illnesses for which you can claim this deduction. Serious diseases like heart problems, cancer, neurological diseases, kidney failure are included.
“The scope can certainly be increased to at least include covid complications. This list has not been reviewed for a long time and the changing health scene in the country means this list deserves a makeover. Rather than complicate matters for the taxpayers, the government can simply ask them to attach the relevant reports in the tax return itself so that it becomes easy to verify and authorize this deduction. to provide further evidence for medical treatment,” says CA Niyati Mavinkurve who is also a co-founder of Let’s Make You Rich.
While the current tax slabs have not changed for the past seven years, inflation has reduced the purchasing power of money. Yet outright changes in the rates/brackets of direct or indirect taxes (the GST falls under the purview of the GST board) should not be part of the budget. However, amid the third wave of the Covid-19 pandemic and serious concerns about inflation, people are looking for a budget that can help create more jobs, lower commodity prices and improve their livelihoods. overall quality of life.
1 Deduction for life insurance premium, medical insurance & housing allowance under the new tax regime
Currently, the majority of taxpayers are still opting for the old tax system because the tax obligations are more advantageous compared to the new tax system and therefore the compliance burden of filing detailed tax forms still exists.
“To make the new tax system more attractive to taxpayers, the familiar deductions claimed by individual taxpayers, i.e. the deduction for housing allowance, life insurance premium and the medical premium, must be allowed as a deduction when calculating tax according to the new tax regime since these investments are mainly made not to save tax but to cover risks and housing allowance is part of salary structure provided by most employers,” says Maneet Pal Singh, Partner, IP Pasricha and Co.
2. Provide a one-time Covid deduction
Due to Covid-related hospitalization and treatment costs, which may have caused enormous financial pressure on taxpayers in 2021, special one-time deduction of Rs 1 lakh is being requested, says Adhil Shetty – CEO – Bankbazaar. com. Even Archit Gupta of Clear thinks the government could grant a special deduction related to COVID expenses under Section 80D or 80DDB to provide tax relief to COVID-19 patients and their families.
3. Home work allowance:
“The budget can introduce tax-free work from home allowances for salaried employees. Allowing deductions for these expenses will increase take-home pay, ultimately creating demand for goods and services in the country,” said Archit Gupta , CEO of Clear.
Due to the high collection of direct taxes during this financial year, it might be possible to increase the tax deduction limits. For example, the standard deduction available to those with wage income may be increased, currently at Rs.50,000. This can be adjusted for inflation each year. The standard deduction of Rs 40,000 was introduced in 2018 and it was later increased to Rs 50,000 in the 2019 interim budget. The request for a higher standard deduction cap comes at a time when household expenditure has increased due to inflation.
4. Increase in limits under Section 80C Section 80C and Section 80D:
A high collection of direct taxes during this financial year could help to revise these ceilings upwards. A higher deduction under Section 80C may be allowed for the Equity-Linked Savings Scheme (ELSS), or a separate limit may be set to encourage more investment in mutual funds in India.
“The threshold for various allowances and deductions was established many years ago and has remained unchanged. An increase in these thresholds is overdue, for example, the deduction threshold under Section 80C is capped at Rs 1, 5 lakh in 2014 and remains the same same after 8 years.The cap of a few of the allowances such as Child Education Allowance, Transport Allowance etc. has remained unchanged for decades and completely out of step with the current reality of costs in this regard. Similarly, the Rs 2 lakh cap on interest deduction on home loans is impractical in view of rising property prices,” says Rahul Charkha, Partner, Economic Law Practice.
Additionally, there are many taxpayers for whom the Section 80C limit is exhausted with the repayment of their EPF principal and home loan.
5 Deductions for higher education savings: In India, a person generally spends 1/3 of his income on the education of his children. Saving for children’s higher education is therefore an important financial goal for any individual and a portion of income is usually earmarked for such savings.
“Currently, there is no express deduction/exemption for such savings, except for the Sukanya Samriddhi Yojana, which is specifically for a girl. The tax benefits are also not substantial as the deduction is clubbed within the limit of Section 80C of Rs 1.5 lakh per annum.This deduction encompasses various other tax-saving investments/expenses (such as Employees Provident Fund, Government Provident Fund, repayment of principal on a home loan, children’s school fees, National Savings Certificate, etc.), leaving limited leeway to claim the deduction for a higher amount of education savings” , says Anand Chatrath, Managing Partner at BM Chatrath & Co LLP.
Additionally, to encourage millennials to invest in their education, some suggest the budget could incentivize investment in education.
“A new section of investments for education can be earmarked for tax-saving schemes. With no deductions, investments in education can be exempt from long-term capital gains with brakes and checks and balances in place to curb any abuse. Such measures will certainly result in a raise for all players in the economy,” said Sujith Narayanan, co-founder of Fi Neo Bank.
6. Deduction for medical expenses u/s 80D: Section 80D allows a deduction for medical expenses only if they are incurred in connection with the medical treatment of an elderly person not covered by health insurance. In other words, no deduction is allowed if the amount is incurred for medical treatment of:
a) A person who is not an elderly person; Where
b) A person covered by a health insurance policy.
“Although the elderly are more vulnerable to the coronavirus, it has indeed infected and hospitalized people of all age groups,” Chatrath said.
According to Shetty, policy premiums have also increased during the pandemic, which is why he recommends that deductions for non-citizens under 80D be doubled to Rs 50,000 to enable all families to have coverage. higher to protect against hospitalization costs.
Section 80DDB allows the deduction of a certain amount in the event of medical treatment. The section contains a list of illnesses for which you can claim this deduction. Serious diseases like heart problems, cancer, neurological diseases, kidney failure are included.
“The scope can certainly be increased to at least include covid complications. This list has not been reviewed for a long time and the changing health scene in the country means this list deserves a makeover. Rather than complicate matters for the taxpayers, the government can simply ask them to attach the relevant reports in the tax return itself so that it becomes easy to verify and authorize this deduction. to provide further evidence for medical treatment,” says CA Niyati Mavinkurve who is also a co-founder of Let’s Make You Rich.