Budget 2021-22: 5 things common man expects from finance minister (2024)

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Budget 2021

Finance Minister Nirmala Sitharaman has promised a budget not seen in the past 100 years. So, naturally, the common man, still reeling under the pandemic and subsequent economic contractionexpects a lot.

Although the finance ministry provided a swathe of Covid-19 relief measures with respect to taxation and subsidies in 2020, the government can still take measures to boost pandemic-curtaileddiscretionary spending of the aad aadmi. Certain measures on personal taxation, Covid cess among others may go a long way with millions of middle and low-income salaried individuals.

Personal tax & deductions

In order to boost income in hands of the common man, tax experts suggest raising the tax exemption limit, below which income tax is not levied, from Rs 2.5 lakh to anywhere between Rs 3.5-Rs 5 lakh.

Kapil Rana, Founder & Chairman, HostBooks Ltd is of the view that the threshold tax exemption limit should be increased from Rs 2.5 to Rs 5 lakhs in the case of normal individual, Rs 3 to Rs 6 lakhs in the case of senior citizens and Rs 5 to Rs 8 lakhs in the case of super senior citizens.

He also suggests a revision of current tax slabs. He said, “tax rate should be 10% for income upto 10 lakhs, 20% for income more than 10 lakh but upto to 20 lakhs, 30% for income more than 20 lakhs”.

Sops to boost spending, investments

The government may look at increasing capital gains tax on the sale of property or equities to boost revenues. However, certain relaxations in the same can go a long way in promoting investments and savings.

"The holding period of all long term capital asset which is currently at36 months should be reduced to 24 or 12 months. The capital gain exemption should also be allowed in the cases where the asset is purchased in the situation where clubbing provisions are applicable.Short term capital loss (other than under Section111A) which is presently allowed to be set off against short term or long term capital gain should be allowed to be set off against any other head of income (excluding special rate income) also as the tax rate on the both cases are same," Rana said.

Covid cess

Cost estimates of vaccinating 130 crore Indians are in the range of Rs 50,000-60,000 crore. The FM will have to find this money from sources other than borrowing owing to an already stretched fiscal deficit situation. India's fiscal deficit for the financial year (2020-21) ending March 31, 2021, is likely to be over 7% of gross domestic product (GDP), more than double of the 3.5% target that was set in the last budget.The fiscal deficit could widen to as much as 8% of GDP, with the current expected economic contraction of 7.7% in 2020-21.

So, the bill for the vaccine is most likely to be borne by the people in the form of a cess. A cess is a tax with specific purpose and duration like Swachh Bharat Cess, education cess among others. This is unavoidable a cess, preferably on higher income groups can be done, feels Sonu Iyer, Partner at EY LLP.

Import duties

Economists are largely divided on the issue of import duties which are largely seen as detrimental even for local manufacturers. However, the government considers its responsibility to safeguard the local industry from the dumping of cheap foreign exports. According to a latest Reuters report, the government is mulling to hike import duties on at least 50 items including smartphones, electronic components and appliances in the upcoming budget. This is done to boost local manufacturing and reduce dependence on imports. However, in year when employment and income remain distressed, this might hit discretionary spending capabilities by the consumer.

This should also be seen in the light of increasing raw material prices globally which is pressuring consumer companies across categories to mull prices hikes to save margins. An import duty hike in such as a scenario will not bode well for the spending power of the common man.