With the intent to boost consumer spending and provide impetus to revive the economy, the finance minister had sought suggestions from various stakeholders for Union Budget 2021.

Here are some expectations of an average Indian:

Tax Provisions

Union Budget 2020 extended the applicability of Tax Collection at Source (TCS) at the rate of 5 per cent for overseas remittance exceeding Rs 7 lakh, under Liberalised Remittance Scheme (LRS). For non-resident Indians earning a salary in India, it is expected that specific clarifications be provided to adjust TCS against the withholding tax dues on monthly salary or income. This will ensure immediate cash flow benefits instead of claiming TCS as a refund through the tax return.

Revisiting Deductibility Criteria

While the introduction of the “simplified tax regime” in the previous Budget has provided some relief to taxpayers, it is expected that loss from house or property has to be allowed with any other heads of income, subject to the existing limit of Rs 2 lakh. This would increase disposable income in the hands of individual taxpayers and motivate them to get covered under this regime.

Residential Status

The government had provided relaxation in computing the ‘number of days’ of stay in India to determine the residential status for 2019-20, on account of the pandemic. It is hoped that a similar clarification is issued for 2020-21 to provide relief for stranded individual taxpayers.

Raise Section 80C Cap

The current cap of Rs 1.5 lakh does not provide much scope to taxpayers to diversify their investment portfolio and at the same time leverage on tax benefits. Considering the ceiling was revised to Rs 1.5 lakh in 2014-15, there is a need to enhance the limit to at least Rs 2.5 lakh to promote investment in various tax-saving avenues.

Deduction Under Section 80D

In light of the pandemic, health has taken centre-stage. With the rise in hospitalisation costs and higher premium payouts, it is expected that the existing limit of Rs 25,000 is enhanced to at least Rs 50,000 for non-senior citizens while the medical expenditure will also be covered within the eligibility criteria similar to that provided to senior citizens.

Attractive Pension Schemes

Despite many advantages offered by National Pension Scheme during post-retirement days, it is still not the first choice for many investors due to a lower ceiling for claiming the deduction for self-contribution. It is expected that the government must enhance the ceiling from the existing Rs 50,000 to Rs 1 lakh. Further, the deduction for the contribution made by the employer under the corporate model could be increased up to 14 per cent of defined salary for private sector employees, similar to that for government employees.

Long-Term Gains

The present tax regime of Long Term Capital Gains (LTCG) arising from the sale of listed securities is depriving the inflation factor at one end while adding to the tax cost at the other. The gains over Rs 1 lakh are taxable at a flat rate of 10 per cent with the benefit of indexation not being available. This has hit investor sentiment and affected the long-term investment pattern of investors. It is, therefore, hoped that the existing tax rate would be reduced to 5 per cent and the threshold be hiked to at least Rs 2 lakh to promote investment in the equity market.

With the economic pushback on account of the pandemic, it would be interesting to see to what extent the government can match the expectations of taxpayers and at the same time, address the roadblocks to boost growth.

(With inputs from Rohit Rastogi)

The author is Partner with Deloitte Haskins and Sells LLP