Union budget 2022: the common man’s wish list
The Union budget for the financial year 2022-23 will be presented as planned on February 1, 2022 by Finance Minister Nirmala Sitharaman. The common man (read as an honest taxpayer) believes that the government should bring some relief and bring joy into their lives through a benign budget. What are taxpayers’ expectations? Here’s the common man’s wish list:
Increase in standard deduction
The standard deduction for employees was reintroduced in the 2018-19 financial year after being abolished in the 2005-06 financial year. The salaried class and retirees could claim certain expenses for transportation, medicine, etc. The flat-rate deduction was introduced in place of the transport allowance and medical reimbursement which were abolished. The common man has had a torrid year with unexpected expenses due to the Covid-19 pandemic coupled with rising inflation. Hence, there is a need to increase the standard deduction from the current Rs. 50,000 to Rs. 1,000,000 and this will be high on the wish list of the common man.
Income tax exemption ceiling
This will always be high on the common man’s wish list and he will be praying more than ever for the finance minister to raise the exemption cap. Incidentally, the FM had introduced the new personal income tax regime in the 2020 budget and provided the option for individual taxpayers to choose one of the tax regimes. Since the tax exemption limit in both cases is Rs 2,50,000, the aam aadmi hopes that this will be raised to Rs 5,00,000. Although an increase in the exemption limit means a loss of revenue for the government, the taxpayer feels that the government can make up for the loss as GST recoveries have been strong so far.
Reduction of interest for late payment of withholding tax
Taxpayers with total tax payable of Rs 10,000 or more in a financial year must pay advance tax, which is the practice of “pay as you earn” instead of paying tax once at the end of the financial year. If the advance tax is not paid quarterly by June 15, September 15, December 15 and March 15 of the fiscal year, the taxpayer must pay a penalty of 12% per annum for any failure to pay withholding tax under article 234B of the IT law. The taxpayer expects the penalty interest to be either waived or at least halved to 6%.
Deduction under Section 80C
Individuals can claim a maximum deduction of Rs 1,50,000 under Section 80C by investing in schemes such as PPF, ELSS, Sukanya Samriddhi Yojana, NPS, Five Year Tax Savings Deposit, etc. The deduction also includes payment of life insurance premium, repayment of principal amount of home loans and tuition fees. The Rs 1.50,000 cap was last revised in the 2014-15 financial year and an upward revision is long overdue. This is a long pending request from the common man, and they hope the limit will be raised to at least Rs 2,50,000. Incidentally, the banks, through the Insolvency and Bankruptcy Act (IBA), have argued for a reduction in the duration of tax savings deposits from 5 years to three years to make this product more attractive and put them on par with mutual fund equity-linked savings schemes (ELSS).
Deduction under Section 80CCD(1B)
Individuals can claim a deduction of up to Rs 50,000 on the amount contributed to the National Pension Scheme (NPS) under Section 80CCD(1B). The deduction under Section 80CCD(1B) is in addition to the deduction allowed under Section 80C. The expectation is that since the government does not provide any social security unlike governments in Europe and the United States, it can at least provide some incentive for people saving today to build a retirement corpus. The common man expects this to be increased to Rs 1,00,000.
Taxability of cryptocurrencies
The cryptocurrency has had a remarkable year with Bitcoin crossing $65,000 in November 2021. While the government has clarified that it will not ban cryptocurrencies and will recognize them as assets but not currency, the common man hopes the government clears the air on crypto taxation.
Other concerns and expectations
There are others on the wish list, such as the reduction of long-term capital gains tax from 10% to 5%, as millions of new retail investors flocked to stock markets. Many others are waiting for the abolition of the dividend tax.
Fingers crossed and hope the budget brings joy.
(The author is a Chartered Financial Analyst (CFA) and a former banker and is currently at Manipal Academy of Banking, Bangalore)
Watch the latest DH videos here: