Budget 2021: Taxpayers eye relief in income tax, slash in TDS, increase in 80C limit, among other reforms

by Jeremy

The Government is likely to focus on the basics, for giving relief on the personal income tax front

By Amit Singhania

Indian Union Budget 2021-22: Amid an economic slowdown induced by the ongoing pandemic, the Hon’ble Finance Minister must grapple with the challenging task of encouraging consumption for economic revival against our peaking fiscal deficit in the upcoming Union Budget, 2021. Tax proposals will play a vital role in this balancing act.

Budget 2021: Taxpayers eye relief in income tax, slash in TDS, increase in 80C limit, among other reforms

To begin with, the Government is likely to focus on the basics, for giving relief on the personal income tax front. For instance, the Government may consider continuing the reduced TDS rates by 25% for another fiscal year to ensure extra liquidity. Additional relief in the form of special deductions for COVID-related health expenses would be a welcome step too. Other measures, such as increasing the basic exemption limit or increasing the threshold of section 80C deductions under the Income-tax Act, could also encourage saving and ensure more spending money in the hands of individual and

HUF taxpayers.   A fillip is also required for the pharmaceutical and health sector that has been working relentlessly in the pandemic. Weighted deductions for expenditure incurred on research and development activities for developing a viable and effective vaccine may make a comeback. Deductions for capital expenditure incurred towards developing infrastructure and supply chain for storage, dissemination, and application of vaccines and other essential medical products will be welcome. The current deduction for capital expenditure incurred towards the building.

Operating a hospital with at least 100 beds should also be allowed to smaller facilities to build medical infrastructure. Likewise, to encourage spending on training and hiring skilled healthcare professionals, the current deductions for hiring new employees under section 80JJA could be increased from 30% to 50%. This could be coupled with raising the threshold of total payments of such additional employees. Such measures will help build capacity and address the growing unemployment rate due to the loss of jobs during the economic slowdown.

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