A lot of relief on the income tax front is expected by taxpayers from the Union Budget 2022. Of these, a hike in the standard deduction limit is clearly the common man’s top ask of finance minister Nirmala Sitharaman. According to Abhishek Soni, co-founder and chief executive officer, Tax2win, the basic exemption limits were last revised in 2017-18.
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So it is highly expected from this budget to increase the basic exemption limit so that it can help middle-class taxpayers to reduce their tax liability to some extent.
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Clarity on Cryptocurrency Taxation
While the government is waiting on the Cryptocurrency Bill, much-needed clarity is expected on its taxation in the upcoming Union Budget 2022. “There are various concerns about the taxation of crypto, its classification, applicable tax rates, TDS/TCS and GST implications on the sale and purchase of cryptocurrencies, etc. which we are hoping will be clarified during the budget session,” Soni said.
Income Tax Slab Rejig
The finance ministry may revise the personal income tax slab in this year’s Budget. Many experts believe that the two tax regimes still confuse the common man. “The government may consider increasing the highest tax slab to Rs.20 lakh from Rs 15 lakh or allow certain deductions to make the new regime more enticing. Budget 2021 did not provide any major relief to the salaried class,” Soni explained.
Standard Deduction and Work from Home Deduction
The Budget 2022 may introduce tax-free work from home allowances for salaried employees. Allowing deductions for such expenses will raise the take-home salary, ultimately creating demand for goods and services in the country.
“Due to the high direct tax collection this fiscal year, there may be a scope to increase tax deduction limits. For instance, the standard deduction available to those with salary income may be raised, currently at Rs 50,000. This may be adjusted for inflation every year,” he said.
Hike in 80C Deduction Limit
Tax experts, however, say that the limit of Rs 1.5 lakh in respect of deduction under Section 80C for various common tax-saving investments/expenditure has remained constant for almost half-a-decade now. Keeping in mind the current economic scenario, encouraging demand is one of the priorities of the government.
“Section 80C and Section 80D limits are certainly expected to be increased this year as they have been the same for so long. Also, high direct tax collection during this fiscal year may help with upward revision of these limits. A higher deduction under Section 80C may be permitted for the Equity-Linked Savings Scheme (ELSS), or a separate limit can be defined to encourage more mutual fund investments in India. Further, a special COVID expense related deduction may be allowed under Section 80D or 80DDB to provide tax relief for COVID-19 patients and their families,” he said.
ITR Forms Need to be Simplified Further
ITR forms for individual taxpayers currently have a lot of disclosure/confirmation requirements, especially in those cases where the taxpayer has income other than salary, interest, etc. Such confirmations are required, even when not applicable in the case of the majority of taxpayers. Further, many times, even after filling all correct details and passing validation checks, technical errors occur at the time of final submission/verification of ITRs.
Tax experts say the Budget should make a sincere attempt in making online forms simpler and making confirmations/disclosures optional for individual taxpayers.
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