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Budget 2022: What to expect?

March 22, 2022
in Tax
BUDGET

This being the pre-budgetary issue of the journal, let us discuss what we can expect from our FM Nirmala Sitharaman with respect to taxation (both direct and indirect). Post the Delta variant surge – the economy had bounced back after dipping very low; the GDP growth rate had bounced back to as high as 8.4% in the July-September quarter. However, due to the re-occurrence of COVID with the new variant (Omicron), this rise seems to come to a halt.

The World Bank recently trimmed its global forecasts for 2022, warning that “Omicron-driven economic disruptions”, among other factors, would cause growth to “decelerate markedly” this year. Likely, we do not expect any tax breaks or tax cuts, nor any changes in the tax slab. The fiscal balance of the government has deteriorated due to the consecutive occurrence of Covid. Therefore, in such turbulent conditions, an action to lower tax rates would lead to further disruption in the Government finances.

However, it has been reported that in the 2019 budget, the government intends to boost the standard deduction limit available to salaried people (which is currently set at 50,000) and retirees by 30-35 percent. Many countries like the US, UK, Canada, Ireland, etc., have introduced certain tax breaks on Covid-19 related medical expenditure (like medical supplies, testing kits, etc.) and work from home expenditure, including home office set-up. However, no such deduction/exemption has been introduced in India and in the budget yet. As a result, raising the standard deduction limit would give individuals more financial flexibility in incurring the previously stated expenses.

A separate deduction capped up to ₹1,00,000 or the actual expenditure incurred by the taxpayer for self or family, whichever is lower, may be considered to be introduced as there is no specific section that covers Covid treatment. Also, a bill was expected to be presented during the winter session of parliament to regulate cryptocurrencies. It was not, however, introduced, and it is now expected that the government would take up this bill during the budget session and decide whether or not it is taxable.

A separate deduction of at least 1.5 lakh for education savings would be a great move in terms of saving for children’s higher education. Furthermore, the section 80C deduction for education expenses (including tuition fees) can be carved out, and a separate deduction for the above-mentioned objective.

Enhancement of deduction of interest on housing loans may be expected to boost the Government’s initiative of affordable housing from 2,00,000 p.a. to 5,00,000 p.a. Attractive economics and push by governments have already increased the demand for electronic vehicles substantially. However, the absence of financing options in the Commercial EV category, which is predicted to be a key growth vertical, remains the biggest issue. To curb this, Government is expected to extend subsidies and provide exemptions on loans for EVs. Additionally, to boost the start-up ecosystem, the entrepreneurs look forward to liberal tax benefits and lower interest in the capital.

Because the new Covid variant Omicron is spreading at a quicker rate, the government is expected to re-impose certain covid-related restrictions, hampering economic activity and causing supply chain and logistics disruptions. Thus, it is unlikely that the GST rates will be reduced; rather, more items and services will be included under the ambit of GST.

The pandemic has also led to an increase in the requirement for better health infrastructure setups. The expenditure in this sector has also risen ten-fold. The government is expected to take steps that would make treatment affordable for the masses.

We would need to sit back and wait until the mystery box opens and then see whether these expectations turn into reality.

Written by: CA Sourav Agarwal

To learn more, get our Journal: PW Insider for FREE!

Read next: PW Insider: March 2022 Edition

For more information, reach us at [email protected]

Team, MyGoalMySip.

Tags: BUDGETBUDGET 2022FUNDSINVESTMENTMUTUAL FUNDMUTUAL FUNDSpersonal financeSAVINGSTAX
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    MyGoalMySip is an Online Mutual fund investment platform powered by Prudent Wealth. As an investor, it might be hard to find the perfect investment opportunity; therefore, we’re here to help you make an informed decision.

    Our goal is to educate people and make them financially literate, and at the same time guide you in your investment journey, in short MyGoalMySip is your investment buddy.

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