• PERSONAL TAXES

  1. On personal tax front a salaried individual can expect Enhancement of Standard deduction under section 16 for salaried employees from Rs.50,000/- to Rs. 1,00,000/- as it has not changed since Finance Act,2019 given the increasing effect of inflation. The present amount of standard deduction is significantly low given the periodic cost of inflation over the years and the living expenditure of salaried individuals. There is a dire need to enhance such deduction limit in order to help lower income group salaried individual to come out of tax net. The standard deduction for salaried employees should be reinstated to at least Rs.1,00,000/- to ease the tax burden of the employees and keeping in mind the rate of inflation and purchasing power of the salaried individual which is dependent on salary available for disbursement. The Income Tax slabs had not been raised in a meaningful manner over the years and are not linked to inflation unlike in case of taxation of gains from certain asset classes. As a result, over the years salaried individuals net income and hence the purchasing power had reduced despite the cost of living having gone significantly.
  2. We expect an enhancement in the basic exemption limit of Rs.2.5 lacs to further incentivize the individuals as it will in turn increase the investment capacity of individuals. Therefore, considering the impact of inflation and in turn benefitting the individuals with lower income group, it is anticipated from the coming budget to enhance the basic exemption limit so that it can assist the taxpayers who are middle-class to decrease their liability to some extent.
  3. It is expected that the Government will enhance the limit of deduction given on tax saving investments under section 80C of the Income Tax Act,1961(herein referred to as the Act) from Rs.1,50,000/- to Rs.2,50,000 and simultaneously u/s 80D of the Act from Rs.50,000/- to Rs.75,000/-. Also, under section 80D of the Act, it is expected that full deduction for health insurance premium paid u/s 80D may be allowed and not to tag it with a deduction for medical expense. Apart from the deduction for health insurance premium, a separate deduction for medical expenses should be made available which will be apart from preventive health check-up.
  4. Key expectation of stakeholder from the budget is regarding Tax rate on dividend income earned by residents and non-residents. There is a considerable difference in effective tax rate on dividend earned by resident and non-resident. Through this budget, it is expected to reduce the difference in effective tax rates. After abolition of dividend distribution tax in year 2020, dividend is now being taxed in the hands of recipient on which effective tax rate could go high as 35.88%. As per provisions of section 115A of the act, dividend is taxed @20% in case of non-residents. And, Non-residents can also claim DTAA benefits which will result in further reduction in effective tax rate.

CORPORATE TAXES