Many people demanded to lower taxation, particularly those belonging to the middle-income group. They have requested the govt to either increase the general tax exemption threshold or introduce tax breaks to scale back strain on their house expenses.
While the govt might not honour all of their requests, it’s possible to take specific steps to ease taxation on the middle-income group. Economists indicate that not several changes are going to be there in tax because of the current economic scenario.
However, tax consultants said the govt might introduce some offerings to boost demand and speed up economic growth.
Here are several taxation changes that might be declared by Nirmala Sitharaman:
1) Income Tax Exemption Limit
Since a full tax rebate up to Rs 5 lakh was introduced below Section 87A in the interim budget, it is unlikely that there will be any other alteration in the exemption. However, citizens and plenty of business bodies need the govt to extend the tax exemption threshold from the prevailing Rs 2.5 lakh to a minimum of Rs 3 lakh.
Many are hopeful that the govt would create amends to extend the limit. However, it might result in a reduction within the current assets as a lot of individuals are going to be exempted from paying tax.
Considering that the govt desires to extend the country’s assets, such a move is incredibly doubtful.
2) Higher tax Deduction
People exempting a hike in exemption limit might end up being frustrated. However, the govt might cheer them up by introducing higher deductions below many sections of the income tax Act.
The tax deduction allowed underneath Section 80(C), presently at Rs 1.5 lakh, may be raised to Rs 2 lakh or above.
This will permit individuals to avoid wasting more tax on investments created underneath Section 80(C) of the income tax Act. Investments towards PPF, EPF, NSC, mounted deposits and NPS qualify for deduction underneath Section 80(C).
3) More Tax Benefits Towards Healthcare
There are high possibilities that the government can increase deduction underneath tax saving instruments out there in healthcare. Business bodies have already asked the govt to extend tax saving underneath Section 80(D) of the income tax Act.
The limit might be increased from the present Rs 25,000, applicable to individuals aged below 60 years, underneath Section 80(D). The concession might also be raised underneath Section 80(D) for individuals above the age of 60 years. The current limit of exemption for individuals above 60 years is Rs 50,000.
4) Higher Deduction On Home Loans
Since the real-estate sector has been affected negatively because of a requirement holdup, the govt might provide additional tax edges to consumers and supply a much-needed boost to the arena.
According to the newest details, individuals will claim the most deduction up to Rs two hundred thousand underneath Section 24B of the Tax Act.
According to economists, the govt might increase this limit further to incentivise buying housing properties for boosting demand in the sector. An individual will claim this deduction from the year in which the construction of the house is completed.
5) Tax-free bonds might witness a comeback
One of the critical goals of the govt in the budget is going to be to boost infrastructure projects because it holds the key to promoting job growth and pushing up demand.
In such a situation, it might not be a surprise if tax-exempt bonds witness a comeback.
The instrument can facilitate the govt to raise capital through government entities for infrastructure projects. Such bonds are known as ‘tax-free’ because the interest earned on them isn’t taxable.
While these bonds have a long period of maturity–ranging from ten years or more–they are safe than several other choices offered in the market.