Budget expectations 2022: Here’s why income tax slabs may not change this year
- The individual taxpayer is amongst the most impacted class in the post-pandemic world.
- While experts believe that the government might keep the tax slabs unchanged, they expect assistance to come in from an easier route.
- This, experts suggest, would allow the government to put more money in the pockets of taxpayers, thereby revitalising spending and consumption, resulting in a boost to the economy.
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Despite the COVID-19 pandemic forcing people to travel less and work from home more, resulting in lower travel expenses, the cost of living has gone up largely due to the rising inflation as well as COVID-related expenses like hospitalisation, medicines and more.
Lower disposable incomes lead to lower consumption and eventually, a slowdown in the economy. More money in the pocket leads to people spending more and helping the economy shift gears. And one of the ways to put more in the pocket of the people is by reducing taxes.
With that in mind, if you are wondering what’s in it for your pocket, we have experts from one of the Big 4 accounting firms to tell us what to expect from Budget 2022.
Why income tax slabs may not change this year
“While there are reports stating that there is a need to increase the basic exemption limit (BEL), which is ₹2.5 lakh, my personal take is that it is something that will remain, for the simple reason that the idea is to widen the tax net. If you keep on increasing it [BEL], you are not widening it, so I’d rather keep it the way it is,” Hemal Zobalia, partner at Deloitte Haskins & Sells LLP told Business Insider.
“If there is money to be given in the pocket [of taxpayers], I would rather focus on people earning less than ₹10 lakh or ₹15 lakh by increasing the deductions,” he further explained, stating that the government will likely stay away from making any major changes in tax rates.
If anything, Zobalia expects the tax slabs on the higher end – for instance, the upper end of ₹10 lakh, could be increased to a higher level.
But without touching the tax slabs, how can the government put more money in the pockets of taxpayers? The answer is, via deductions.
Standard deduction for salaried individuals needs to go up
AdvertisementSalaried individuals are allowed a standard deduction of ₹50,000 from their gross total income, while computing their taxable income. As a result, this deduction brings down your taxable income by ₹50,000.
Zobalia believes that the government could increase this limit and use this as one of the channels to let people have more disposable income in their hands.
The increase in standard deduction is even more likely considering the fact that it has remained unchanged for quite some time now – it was hiked from ₹40,000 to ₹50,000 in Budget 2019, the year before the pandemic struck the world.
Section 80C deduction for all individuals needs to go up
Another deduction that could see an enhancement from the government is Section 80C, which allows individuals and Hindu undivided families to claim deduction up to ₹1,50,000 for investments in public provident fund, national savings certificate, equity-linked savings schemes among others.
AdvertisementThe ₹1,50,000 limit has remained unchanged since 2014, and Zobalia believes that it is bound to increase as the government could account for inflation and consider a hike.
COVID-related expenses should be allowed as a deduction
Lastly, the pandemic has forced everyone to spend money on hospitalisation and other health-related expenses due to COVID-19 infections.
Zobalia expects the government to allow deduction of these expenses, over and above what is covered in Section 80D for insurance.
The Indian government has spent less than half the money it had budgeted for capital investments, so far
From higher standard deduction and change in tax slabs to clarity on Covid insurance, here’s what tax experts want from Budget 2022
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