Budget 2021: Chances of big-ticket relief bleak, but salaried expect more tax exemptions

NEW DELHI:  From sudden job losses and salary cuts to increased expenses, the working middle class has had a rough time through the pandemic. And though experts have ruled out any big ticket relief in the Union Budget, here are a few measures that the salaried expect from the exercise.  

Tax slabs  

An increase in the minimum income tax bracket is long overdue and it’s something that every salaried individual  looks forward to every Union Budget. Currently, those with a taxable income of up to Rs 2.5 lakh per year, do not have to pay any tax.

“The first question post-budget we are asked is how much more or less tax do I have to pay now. With the new salary structure, the take home part is going to be reduced. We also do not see major salary increaments in the near future. At best, companies will compensate for the loss, so the tax slabs should be increased... at least to Rs 3.5 lakh. This will give a major relief to the salaried class and boost consumption too,” said Rohit Jain, a personal finance advisor. 

Deduction and Exemption 

The existing tax exemption limit is Rs 1.5 lakh, which was last revised in 2014.

The salaried class would also be served if the upcoming Budget results in an increase in the yearly deduction allowed under section 80C from Rs 1,50,000 to Rs 3,00,000. 

While a major change in tax slabs has been ruled out, experts say that the government is likely to increase the exemption limit under Section 80D for health insurance premiums, which will encourage people to opt for adequate health cover.

The government is also considering hiking the exemption limit for the National Pension Scheme. More flexibility being extended for NPS withdrawals is also expected.

At present, an account-holder can withdraw 60 per cent tax free and rest is to be mandatorily invested in annuities.

“Providing additional tax benefit for new home buyers (will be) a welcome initiative.  The government can extend higher tax rebates on interest repayments on home loans, which will also help the ailing realty sector,” Jain noted. 

Potential tax relief measures this Budget

• While large scale changes in tax slabs are unlikely, deductions under 80C may be hiked.
• National Pension Scheme withdrawals may be made more flexible, while the NPS exemption may also be hiked.
• Experts note that extending tax benefits for home-buyers will be a welcome move since it will help the flagging realty sector too.