Pre Budget Expectations 2022: All you need to know

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Pre-budget 2022

Union Budget 2022 is less than two weeks away now. Before we get into the expectation from the budget, let us look at how the market has performed in the month prior to the budget. It will give an idea to investors of what to expect in the coming days.

  • Over 2011-21, the market gave negative returns in the one-month period ahead of the Budget in 2011, 2014, 2016, 2020, and 2021.  
  • In the last three years, the market started to correct between January 15 and 20, before witnessing a post-Budget rally. We are seeing the same trend this year as well.

Expectation from budget 2022

Salaried Taxpayers' Expectations - There were no significant tax benefits last year in the budget. taxpayers are expecting some relief this year. The work from home scenario has been heavy on the pocket for most people as people have to spend more on the internet, telephone, and electricity. Salaried individuals are hoping for a work-from-home allowance that would cover these expenses and also provide tax relief. Given the severity of the pandemic and the fact that many families' medical insurance coverage is insufficient, the deduction for mediclaim coverage if enhanced could be beneficial.

Reduce import duty on gold - Gems and Jewellery Export Promotion Council (GJEPC) has urged the government to reduce import duty on gold to 4% from 7.5% and a special package for the sector in the forthcoming Budget.

PLI schemes - The market is also looking for support measures for sectors such as housing, autos, and auto ancillaries, PLI-related measures in multiple sectors.

Expectations of various sectors

Insurance sector - To boost health insurance and its deeper penetration in the country, the insurance sector wants GST reduction from 18% to 5%. Health insurance is an essential commodity and needs to be slotted in the 5% GST tax slab to make it more affordable to access quality healthcare. Some insurance companies want the government to help promote pure risk products by increasing the tax deduction limit for health insurance products and introducing a separate deduction for term insurance products could be a positive stride in this direction.

MSME sector - Financial support is expected from the government and reforms surrounding import substitutes to promote self-reliance and domestic manufacturing. Policies around green energy are expected from the government for MSMEs. The policies will also help create a sustainable economy and decrease domestic reliance on energy imports.

Hospitality sector - The sector expects the Finance Minister to further support the sector by permitting the corporate bookings and MICE to come under IGST. This will help the companies to avail GST input credit, which will encourage them to spend their annual budgets in India rather than opting for South-East Asia destinations.

Educational sector- The education industry has been completely changed since the start of the pandemic. More and more children have to take lessons online now. Hence, it is expected from the government to provide financial support to the EdTech startups in the form of longer-term tax exemptions and funding support. The government should also introduce plans for better internet connectivity infrastructure across the country and help e-learning players with a robust e-learning infrastructure.

Let us wait for the details from the Finance Minister and follow our space to stay updated on the news.