The 2022 budget is fast approaching. Standard deduction hike, income tax relief, tax relief for saving for children’s education are among the expectations of the working class in Nirmala Sitharaman’s Union Budget 2022 . Some key expectations are mentioned below.
Tax-exempt homework allowances for employees
“The 2021 budget could introduce tax-free homework allowances for employees. Allowing deductions for these expenses will increase take home pay, ultimately creating demand for goods and services in the country. Due to the high collection of direct taxes during this financial year, it might be possible to increase the tax deduction limits. For example, the standard deduction available to those with wage income may be increased, currently at Rs.50,000. This can be adjusted for inflation every year,” Spokesperson – Mr. Archit Gupta, Founder and CEO – Clear
Standard deduction hike, income tax relief to save for children’s education
For salaried persons and pensioners, the standard deduction is an authorized deduction from gross wage income. This deduction reduces the taxable salary income of the individual, which also reduces his tax burden. After being abolished during the 2005-06 financial year, the standard deduction for salaried taxpayers was reintroduced from the 2018-19 financial year to ₹40,000. The deduction ceiling was finally raised to ₹50,000 from fiscal year 2019-20.
“Given the recurring cost of inflation over the years and the current living expenses of paid workers, the amount of the deduction is relatively small. Since the start of the Covid-19 epidemic, household spending has been negatively impacted by rising medical costs and work-from-home expenses such as furniture, energy and internet. Thus, the current flat-rate deduction ceiling of ₹50,000 should be increased to at least ₹75,000. In addition, taxpayers electing the Concessional Optional Scheme under Section 115BAC of the Income Tax Act 1961 may be eligible for the standard deduction,” says Lokesh Acharya, Director and Co-Founder of Fincorpit Consulting Private limited.
The need for a college savings deduction for children
Saving for a child’s college education is an important financial goal for everyone, and most people set aside a percentage of their salary for this purpose.
“With the exception of the Sukanya Samriddhi Yojana, which is specifically for girls, there is currently no express deduction or exemption for these funds. Because the deduction is combined within the limit of Section 80C of ₹1.5 lakh per year, the tax benefits are also minimal. A separate deduction of at least ₹1.5 lakh for education funds would be a welcome move in this direction. Alternatively, the education expense deduction (including tuition) may be excluded from the Section 80C deduction and a separate deduction may be considered. In short, such an increase in standard deductions and additional education expense deductions will bring more savings for future purposes while providing incentives to individuals through tax savings,” says Lokesh Acharya, Director and co-founder, Fincorpit Consulting Private limited
Revised tax plates
“Most salaried citizens would like relaxed tax rates or revised tax brackets, but relief through lower tax rates seems pious at this economic stage. Reasonable expectations would include receiving relief through a higher standard deduction following a pandemic-induced spike in the cost of living. Tax breaks on expenses incurred for preventive health care and insurance purchases would be very beneficial. Other relief measures could include expanding 80C limits and improved breaks on loans ancillary to large ticket purchases like homes and electric vehicles. Such improvements can have a positive impact on personal finances and contribute to the broader economic agenda,” says Mr. Nirav Karkera, Head of Research, Fisdom.
Lowering the tax rate from 30% to 25%
The budget creates a lot of talk in all sectors and the same is true in the hall of the working class. “Individuals expect lower tax rate from 30 to 25 year olds who have an income above 10 lakh per annum which is evident for many reasons. In addition, they expect deduction and to an exemption to counter the higher cost of living, including medical expenses, child expenses, rentals, etc. In addition, there are dozens of investment programs solely focused on small savings, says Amit Gupta, MD, SAG Infotech.
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