Home Substantial portion 2022 budget forecasts: increase in deduction limits, reduction in surtax rates expected

2022 budget forecasts: increase in deduction limits, reduction in surtax rates expected

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Expectations are high as Finance Minister Nirmala Sitharaman is going to present the Union budget for the financial year 2022-23 on February 1, 2022 amid the Covid-19 pandemic.

Expectations are high as Finance Minister Nirmala Sitharaman is going to present the Union budget for the financial year 2022-23 on February 1, 2022 amid the Covid-19 pandemic.

Deduction u/s 80D

The pandemic affecting a large number of people, we are witnessing a surge in medical expenses. Thus, an increase in the deduction limit for health insurance and medical expenses under Section 80D of the Income Tax Act is provided.

“Covid-19 has forced insurance companies to increase medical premiums. The corresponding increase in the Section 80D deduction is the need of the hour,” said Gopal Bohra, Partner, NA Shah Associates.

Speaking about the 80D limit, Prachi Mehta, Director of Dhruva Advisors, also said, “Increased amount of deduction for medical insurance premium under section 80D – Medical expenses have increased over time and , therefore, families need improved medical coverage. An increase in the quantum of deduction under Section 80D could be beneficial.

Home work allowance

As many employees are forced to work from home to avoid the spread of the new coronavirus, it would be beneficial for them if tax incentives were granted on expenses related to working from home.

“Working from home has gained traction in the pandemic and is seen as a feasible solution to curb the spread of the virus. Employees incur costs to set up a “home office,” and the government should allow some deduction to salaried taxpayers for these incurred expenses,” Bohra said.

Advocating for the work from home allowance, Mehta said: “The work from home scheme is here to stay. Employees incur several infrastructure costs to ensure that working from home is seamless and efficient. Additional allowance (e.g. in the form of a separate standard deduction) for expenses incurred by employees for working from home should be considered.

Standard deduction

Bogged down by wage cuts, job loss and high inflation, salaried taxpayers are also set to get further relief through an increase in the standard deduction limit from the current level of Rs 50,000 to Rs 1 lakh.

“The pandemic has hit the salaried class very hard, an increase in the standard deduction of Rs 50,000 would bring much needed relief to salaried taxpayers,” Bohra said.

Income tax supplement

With high surcharge rates affecting taxpayers earning more than Rs 50 lakh in a tough financial year, a reduction in rates is expected.

“While corporate tax rates have been lowered in the past, individuals in high income brackets are taxed at a rate of almost 42% on a substantial portion of their income. A reduction in the surtax rate for high-income people would provide some respite,” Mehta said.

Dividend income supplement

Speaking about the disparity in the collection of surtax on dividend income from stocks and mutual fund (MF) shares, Bohra said: “The surtax on stock dividends is limited to 15%, while the Surtax on dividends from shares of mutual funds is not limited to 15 percent. hundred. In the next budget, we expect the government to eliminate this disparity.

Relief for Genuine Transactions

Relief is also provided for genuine transactions, in situations such as receipt of sum of money above Rs 50,000 without any consideration (Section 56(2)(x)), etc.

“Deeming provisions of law such as Section 56(2)(x) or Section 50CA were introduced to combat tax evasion. Often transactions involving real circumstances fall under these provisions and the taxpayer ends up paying higher taxes. An amendment so that the deeming provisions only apply to cases of wrongdoing and an exception for genuine transactions would be welcome,” Mehta said.

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