As the government gets available to announce its annual expenditure plan for 2021-22, taxpayers in the country are questioning whether they will get tax benefits as part of the Centre's plan to revive growth and demand.
While several industry bodies have sent instructions for providing relief to taxpayers, only minor changes can be required in the upcoming budget as the pandemic sharply drained government finances in 2020.
It may be noted that the Centre’s expenditure targets in the continuous financial time have already been breached due to the extra spending during the pandemic. The government’s fiscal deficit for 2020-21 is expected to be double the 3.5 percent of GDP it predicted in February 2020.
Lower revenue models for most parts of the year due to the massive economic distress created by the pandemic has also put the government on the back foot in times of spending.
Likely income tax changes
Any significant relief with regards to income tax is unlikely this year, but some changes like tax deduction towards improved health expenses in the wake of Covid-19 can be expected.
For instance, experts predict the government to improve tax benefits under Section 80D of the Income Tax Act. There could be tax preparations made for specific Covid-19-related expenses, according to experts. However, no government official has indicated such a possibility as of now.
Simply put, taxpayers in the country are questionable to see any major changes in standard deduction limit or tax brackets supporting the old regime as the government had launched a major income tax change last year.
It is worth mentioning that the government in its premature budget introduced an alternate more manageable regime with revised income tax slabs in addition to the old regime. Under the new tax regime begun last year, taxpayers who do not have any investments to declare deductions can benefit due to lower tax slabs.
But the situation this year is inconsistent due to the economic devastation caused by the pandemic and the government is awaited to focus more on Covid-hit sectors and healthcare.
At the most, Finance Minister Nirmala Sitharaman is foreseen to provide a roadmap for further rationalisation of income tax in the country. But as far as actual changes on the tax front are involved, citizens should not expect much from Budget 2021.