Individual taxpayers have higher expectations from Budget 2022 for streamlining provisions.
The Covid-19 pandemic has resulted in a severe loss of life worldwide and poses an unprecedented challenge to public health, jobs and economic progress. Policymakers have the difficult task of getting the economy on track and starting to build a safer future of work and more effective in mitigating the crisis’s impact on employment. employment and income of taxpayers.
Amid this crisis, individual taxpayers, who contribute close to 35-40% of direct tax income, have higher expectations from Budget 2022 for the rationalization of provisions, ease of compliance, etc., as these will help them reduce the economic damage caused by the pandemic.
1. Increase the threshold for qualifying investments to claim the deduction: Currently, a deduction of up to Rs 150,000 is allowed for investments made in qualifying categories. With a multitude of terms – life insurance premiums, deferred annuities, contributions to a reserve fund, subscriptions to certain mutual funds, stock shares or debit notes, expenses like tuition, etc. – only fair to individuals when this limit increases to Rs 250,000.
2. Amendment of the threshold for calculating interest income tax for the reserve fund: The previous budget was applied to calculate tax interest incurred on contributions from PF made up to Rs 250,000 a year (in case of employer contributions). To encourage social security savings, it would be a fair request to raise the threshold to Rs 400.00 a year.
3. Crypto Tax Clarity: Considering crypto as an investment vehicle has gained great traction in India, it is essential that the Budget clears up the ambiguity regarding the taxation of cryptocurrencies and clearly explains the terms. related to new age investments or business transactions. This will provide much needed clarity to millions of investors/businesses in India and may also pave the way for new age technological advancements in the country.
4. Changes to the new tax regime under Section 115BAC: There is no denying that the government has introduced a substantial reduction in tax rates under the new regime. However, all significant/major/recurring exemptions and deductions allowed under the old regime – HRA, LTA, standard deduction, Chapter VI-A deduction, etc. – were denied for individuals choose the new tax regime.
It would be a significant move for the salaried demographic if the government were to amend the provisions to include one/several of these key exemptions/deductions, assessing whether providing even a worthwhile incentive whether or not it is significant for individuals to choose the new tax regime. This will attract a large portion of the salaried demographic to the tax filing initiative.
5. Income deduction for ‘residential property’: Currently, the loss incurred on claiming interest deductions from residential property income can now be factored into other income (such as wages, capital gains, professional income or income from other sources) up to Rs 200,000. In addition, any carried forward losses are not carried forward to subsequent years on income other than income from residential properties. This results in loss of carry forward loss due to higher interest payable in subsequent years. Therefore, the government should increase the maximum limit of such deduction from Rs 200,000 to Rs 350,000 per year.
Furthermore, current regulations do not allow deduction of maintenance fees paid to society etc. A new provision should be added to allow such deduction to be deducted from rental income earned for income only. actually belongs to the taxpayer.
6. New work-from-home (WFH) deduction: It is an ongoing requirement from home workers to pay the cost of setting up a home office space to qualify for the annual WFH 50,000 deduction regardless of the selected tax regime. Just to make a point, the UK government has provided a flat tax break of GBP 6 per week to reduce additional household costs for WFH people.
Budget 2022 has caught everyone’s attention as there aren’t any specific changes to be expected for the average person and it’s mostly a guessing game at this point. It will be interesting to see what changes will be presented this time.
(Disclaimer: These are the personal opinions of the author.)
