32.5 C
Monday, April 12, 2021

Budget 2021: All the expectations from every community you need to know

This year's annual budget presented by FM Nirmala Sitaraman could turn out to be India's most consequential Budget in history. From putting more money in the common man's hand to reducing income inequality, the expectations on the 2021 budget are high and complex.

From CEO’s of top companies, to payroll employees, to informal sector workers to retired grand parents everyone have their own expectations on the upcoming 2021 budget that will be introduced in the Parliament on Feb 1st. For a third budget, there is a lot FM has to manage to meet all the expectations.

Here is a partial list of expectations on budget 2021:

  1. Increase in the Income Tax deduction Limit
  2. New deductions for home loans
  3. Separation of 80C from big ticket items
  4. Increased spending on health care
  5. Relief and policy changes by the start up community
  6. Work from home allowance by the IT Employees
  7. Enhanced spending on education and boost to “EduTech” companies
  8. Ease of corporate taxation methodology including reduced TDS
  9. Ease of credit for MSMEs
  10. Address tax issues in capital markets operations (including foreign and domestic)
  11. Minimal COVID  cess
  12. Reduction in Fuel Prices

Income Tax deduction Limit:

If you are a salaried employee either private or government, you might be expecting a “good news” of increased IT deduction limit. However, experts believe this less likely to happen. 2020 is a year like no other for both general public and for the government. Income levels dropped significantly for everyone. Speaking to the Live Mint, Archit Gupta, founder and chief executive officer, ClearTax  said “2020 has been a challenging year for the government and taxpayers alike. Government has been struggling with poor revenue collections, while on the other hand there is increased pressure to make investments in infrastructure projects to generate jobs and push the economy ahead. Another pressing need is to implement a nationwide COVID-19 immunization program”.  Given this, it is less likely the government may be willing to reduce its incoming revenue.

Increased deduction for home loans:

Currently, Section 24B of the taxation laws, a home owner can claim a tax credit for a sum of up to 2 Lakh. But this is no where enough to encourage and create an incentive for the new home buyers. An increase in the limit of this credit will create enough incentive for buyers to buy new or existing homes. Thus boosting the credit based spending and housing sector.

Additionally, there are too many sections that oversee the deduction of principal and interest on home loans. 2021 budget is expected to simplify tax code provision and consolidate  Section 80C, 24B, 80EE and 80EEA (which will amount to 5 lack rupees). Sections of 80EE and 80EEA can only be availed first-time home buyers and is applicable for properties of a certain size. If this provision can be relaxed, it will further create incentive for home buyers and boost morale of existing builders to increase their investments.

80C Reform:

One of the major expectations out of 2021 budget is a complete overhaul of Section 80C. At the moment, the 80C looks too crowded and jams too many categories for a minimal deduction of 1.5 lakhs. For people living in urban areas, the current limit of a generic category of 80C at 1.5 Lakh rupees is not enough. A typical urban dweller will have two school going children, a home loan, charity expenses, life insurance premium, a home loan payment and a PF contribution. Together, these essential expenses will go over 1.5 lakh per annum. Taking out home expenses and treating them separately as pointed out above will help a typical urban household. If not a complete overhaul of 80C Section, a different treatment of home expenses is expected out of 2021 budget.

Healthcare spending:

Even though India did relatively better compared to managing COVID 19 spread, the outbreak clearly showed the lack of effective and enough public health facilities, beds, and pushed the health care workers hours to its limits. Compared all the G8 nations, India spends the least amount of budget on its health care infrastructure. This has to change.

India healthcare spending compared to g8
Why Budget 2021 needs to increase healthcare spending? India healthcare spending compared to G8 Countries. Data – World Bank.

There is no better time than 2021 budget to drastically increase the spending on India’s public health care infrastructure and human capital. A significant increase in the healthcare expenditure is a major budget 2021 expectations.

Startup community expectations on 2021 budget:

India’s start ups had a really bad year. According to one estimate from NASSCOM, approximately 40% startups halted operations in May 2020. For all valid reasons, now the start up community is expecting big reliefs and policy reforms in the 2021 budget.

In the 2020 budget speech, FM announced that employees at startups exempt under Section 80-IAC (ESOP Taxation) could defer paying income tax on stock options for a period of five years or until they quit the company or sell their shares. One estimate tells there are only 400 startups that have been able to meet the required criteria to benefit from this announcement. Many experts believe it will be huge relief and a boost if the entire start up community is provided with this taxation benefit. There are approximately 40,000 start ups registered with the Department of Promotion of Industry and Internal Trade (DPIIT)

Other expectations on 2021 budget:

Speaking to Times Now, Harsh Bhuta, partner of Bhuta Shah & Co LLP. expressed his desire “….Further, work from Home (WFH) allowance/reimbursements made by employers to employees should be explicitly made non-taxable in the hands of the employee and allowed as a business expense in the hands of the employer..”. This desire represents the reality of how salaried private employees and employers struggled to keep up with the massive disruption the pandemic brought to the otherwise Business As Usual (BAU) 2020.

While this does not represent a comprehensive list of expectations, the list is made to highlight the depth and variety of expectations the Finance Ministry has to manage.

At one end, the common man is expecting announcements that puts more money in his hand. On the other end, corporations are expecting measures from increased infra structure spending, ease of tax regulations, policy changes that stimulate the economy at large. All this has to be handled while addressing growing income inequality. This only show the contrasting expectations on 2021 budget. While this Budget manages to meet these expectations at the federal level, states have to figure out how to navigate these challenging times on their own too. 

For more up-to-date track of Budget 2021 expectations, please follow this excellent live blog by Indian Express. 

Listen to India's best podcasts.

Listen anywhere, anytime.

Platocast podcasts are sourced carefully to bring you the best stories out there.

Explore More

Social distancing goes for a toss at Kumbh Mela, Internet recalls the Tablighi Jamaat incident and asks why is everyone silent now?

Netizens started trending Tablighi Jamaat and started questioning why is Kumbh Mela not responsible for violating the COVID-19 now?

Must Read


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.