What the lay citizen and the experts want the Budget to deliver on Feb 1

Top of the wish list is an increase in deduction under Sections 80C, 80CCC and 80 CCD(1) from Rs 1.5 lakh to Rs 2.5 lakh

Even as India strives to recover from the Covid-19-induced economic crisis, all eyes are now on Finance Minister Nirmala Sitharaman  and her Union Budget on February 1. Indians across social stature, age, gender and economic class will look to the government for incentives, subsidies and tax cuts. Says Smita Wilson, a Mumbai-based private sector employee: "Lower tax rates for all, an increase in exemption limit, or at least an increase in deduction under Section 80C should be considered. The FM should also bring back a separate tax slab for women."  

Up until Financial Year 2011-12, women and men had different income tax slabs, with the former having to pay slightly less tax. However, from FY 2012-13, this was done away with and tax slabs for men and women were made the same. Tapati Ghose, partner, Deloitte India says, "We recommend, that the deduction under Section 80 (Section 80C, 80CCC and 80 CCD(1)) be raised beyond Rs 1.5 lakh, as this will put more cash in the hands of the middle income group." Most expect the limit will be increased to Rs 2.5 lakh.  Wilson wants a special "Upskill Fund" for women to be created that will keep them relevant in the post-Covid job market." 

Smita Wilson

The 40-something-year-old private sector employee from Mumbai says, "Up until a few years ago, women had a separate tax slab, and a lower tax rate. Such a move should be reconsidered, as data clearly shows that Covid-19 has impacted women more." 

Youth: The youth are looking beyond better tax rates, and want friendlier loans too. Arriel Waghela, a 20-plus from Mumbai says, "Among other things, this budget should also focus on education and students. They should provide a waiver specifically designed for education loans." Student loan write-off is a hot topic in West right now. Last year, the Reserve Bank of India offered moratorium relief to various kinds of borrowings, including education loans. And if your are repaying an education loan you took, the interest component is allowed as a deduction from total income under Section 80E. The youth want tax relief on the principal amount of education loans as well. Other youth Business Standard to were looking forward to reduced Goods and Service Tax (GST) or prices of electronic items such as mobile phones, laptops, everyday hygiene products, and staples. 

Arriel Waghela

The 20-something-year-old from Mumbai says, "The government needs to bring technology into the education sector, by giving free internet, tablets and mobile devices for learning to students, especially with study-from-home in the backdrop." 

Senior citizens: Former teacher Prabhajjamma B says, "This year is difficult for senior citizens. Tenants have requested rent reduction due to Covid-19, so our rental income is down. I want enhanced deduction for income from house property." Many senior and super senior citizens rely on small savings for regular income. Prabhajjamma says, "These investments are taxable in the hands of the investor in the year of receipt. We want special concessions for the elderly, such as exempting income arising from these investment from tax. Pension should be exempt too." 

Common man: Covid has put a strain on everyone's pocket, especially the Aam Aadmi. Says Mayur Kashalkar, a human resource professional: "I'm looking forward to tax relief brought on by changes in tax rates/slabs, as that puts more money in our hands and increases our cash inflows. Also enhanced limits to catch up with increasing medical costs, given the Covid-19 pandemic, will help. The present limit of Rs 5,000 for health check-up, deductions for expenditure on medical tests and treatment can be raised." 

What experts say

While tax payers will have their own set of expectations, experts too have their recommendations.  

Says Sanjay Datta, chief of underwriting, claims and reinsurance, ICICI Lombard General Insurance: "Due to the pandemic, everyone has realised the importance of health insurance. So limits should be expanded to get better tax breaks in health insurance." Relief is available under Section 80D for the premium paid on health insurance. An individual can claim a deduction of up to Rs 25,000 for the insurance of self, spouse, and dependent children. An additional deduction for the insurance of parents is available to the extent of Rs 25,000 if they are less than 60 years of age, or Rs 50,000 (as per the Budget 2018) if the parents are aged above 60. Datta says, "We have seen a lot many natural calamities, like cyclones etc, and purchase of home insurance would increase if some tax breaks are available, as in the case of health insurance." 

With work-from-home becoming the new normal, many salaried people now have will have to incur additional expenditure to meet communication and infrastructure requirements. Introduction of standard deduction on such expenditure would be a welcome relief for many. Ghose of Deloitte says, "As far as WFH goes, home office is now an extension of regular office. The employer needs to ensure that the employee has the necessary facilities to work seamlessly. But these facilities can be seen as benefits by tax authorities to be taxed, hence a specific clarification is needed on this. It should not be considered as a benefit, and these facilities need to be provided by the employer." Cash voucher scheme introduced in lieu of leave travel concession should provide a deduction for twice the expenditure incurred for specific purposes to make the scheme more attractive to individuals, rather then the current three times.

Tapati Ghose, partner, Deloitte India

From a recommendation perspective, those who have chosen the regular tax regime and fall into the Rs 5-10 lakh salary bracket are taxed at 20 per cent, but we would recommend to bring it down to 10 per cent, as it affects the middle income group which needs the most support from authorities. 

New regimen and new code: The definition of wages in the new code has significantly widened. Your provident fund (PF) component is set to increase once the new code of wages gets implemented on April 1, 2021. Ghose says, "But there's nothing in the tax laws that exempt that incremental amount. Hence, there has to be a specific amendment in the Act to exempt that." The Code of Wages is a part of four labour codes that resulted from the merging 29 of the 44 central government labour laws. 

Life insurance: The importance of life insurance can no longer be ignored. Says Tarun Chugh, managing director, Bajaj Allianz Life: "With the increased risk perception amongst customers, and with more people are buying term plans, it would be an ideal time for the Government to consider increasing the tax exemption limit for life insurance, or have a separate section for deduction of life insurance premiums." 

The common man wants a the deduction for life insurance premiums to be available to all taxpayers, irrespective of the taxation regime opted. The next critical item for the government to consider would be on how to incentivise individuals to save better for their post-retirement financial needs. Chugh says, "As we don’t have a structured social security system, it’s essential that the annuity and retirement products enjoy tax benefits to incentivise people to save for their post-retirement needs." For instance, the annuity amount received from the corpus accumulated by the customer should be non-taxable. 

Tarun Chugh, managing director, Bajaj Allianz Life

The multiple sections dealing with pension products such as pension schemes of LIC, insurance companies, superannuation funds, and NPS should be consolidated into a single section, for providing a uniform treatment for all pension products.

Mutual Funds: When it comes to investments, many think the budget must focus on the larger need to bring back both employment and growth by stepping up allocation towards infra sectors. A Balasubramanian, managing director and chief executive officer, Aditya Birla Sun Life AMC Limited, says, "The Budget may revisit some of the tax provision related to capital market instruments such as long term capital gains tax in equity, TDS in fixed income instruments such as REIT etc, also dividend related taxation."pension schemes of LIC, insurance companies, superannuation funds, and NPS should be consolidated into a single section for providing a uniform treatment for all pension products."