Budget 2022: Expectations from Budget 2022 on taxation

Taxation
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Just like every other year, the Finance Minister of India has to keep up with the expectations of a number of sectors of the economy as well as all the sections of the population. The challenges this time are more pronounced. We are still into the COVID pandemic due to which the government and the entire economy suffered a lot. The government had to increase public spending by borrowing because of a steep decline in revenue generation, the railways also suffered a lot, the fiscal deficit reached new heights, and whatnot. Therefore, the moves are going to be quite subtle. In other words, we may not see very extraordinary offerings in terms of taxation but some reliefs are likely on the way.

Nirmala Sitharaman will be presenting the Union Budget on 1st February 2022. There is going to be a keen interest in what will be there in the Budget 2022 on taxation. A new tax regime or income tax changes in Budget 2022 will be welcomed by both individual and corporate taxpayers but they will have to forgo enhanced limits of tax deductions. However, a large number of taxpayers want to see increased tax deduction limits as part of Budget 2022 tax changes. So what are the expectations that we can have from Budget 2022 taxation?

Enhanced Standard Deduction Limit

The current standard deduction limit is Rs 50,000, which was welcomed by the taxpayers when the Rs 25,000 limit was revised a few years ago. This time the expectation from taxation budget 2022 would be to increase the limit of the standard deduction to Rs 1 lakh. This will bring a number of individual taxpayers, the salaried employees to be particular, into enjoying tax benefits in terms of lower tax liabilities.

Work From Home Allowance

The companies in India have already started offering remote or hybrid work. However, the employees are not compensated properly for the expenses they are incurring while working from home. Internet and electricity bills, furniture costs, etc. have been added up to the overall expenses required to do the office work at home leading to decreased net income. The government thereby may introduce WFH allowances and can also exempt the same from income tax in Budget 2022.

Increased Deduction Limit Under Section 80C

Section 80C of the Indian Tax Act offers deductions for investments made in the mentioned instruments or schemes. The threshold of deduction that can be claimed is only 1.5 lakh. The taxpayers are expecting this limit to be enhanced to Rs 2.5 lakhs as part of income tax changes in Budget 2022. An increased deduction limit will also promote taxpayers to invest more in different schemes available under Section 80C. Salaried employees are also expecting something from the EPF taxation Budget 2022. The hopes are to increase the interest rate offered in EPF schemes.

Tax Slab Reform or Rationalization

There are a total of 10 income tax slabs and the tax charged in each of the slabs does not include surcharge and the applicable cess. The taxpayers are thereby expecting further rationalization of tax slabs by reducing the number of slabs as well as simplifying the applicable taxes by including the applicable cess and surcharge.

Higher Income Tax Exemption Limit

The current  income tax exemption limit is Rs 2.5 lakhs, above which the taxpayer will have to pay tax as per the applicable tax slab. The exemption limit of Rs 2.5 lakhs has been there for several years and now it is the right time to increase the same to atleast 3 lakhs. 

There are other expectations as well such as clarity regarding cryptocurrency taxation, tax deduction on COVID bonds, an increased limit on deduction from house property loss, etc. We will have to wait for a few days to see how the Finance Minister copes up with the expectations and what we will ultimately get.

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