The common man, both salaried and self-employed as well as businesses, are keen to understand the provisions of the 2021 budget that will be presented on 1 February 2021. After struggling through economic uncertainties and income disruptions in 2020, tax relief is a dire need for many. Naturally, this makes tax relief an important point on the financial planning and investment agenda of tax-payers. . It would help revive the economy and bring positive changes in the areas of overall spending, consumption, savings, and investment.
Here are some key expectations of the people in the form of tax relief and exemption:
Increase the upper cap on section 80C
Under Section 80C, an individual is eligible to claim a tax deduction on numerous payments like life insurance premium, principal payment of the home loan, provident funds, etc. However, the maximum limit to claim these deductions under Section 80C is Rs 1.5 lakh. An increase in the upper limit here to bring the amount to at least Rs 2.5 lakh would help tax-payers use available funds to strengthen their investment portfolios. .
Extending section 80EEA benefits for another year
The government last year extended the home loan incentive under section 80EEA till 31.03.2021. This section gave the first-time home buyer a property of stamp value of up to Rs 45 lakhs, an additional tax benefit of Rs 1.5 lakh on home loan interest payment. Extending this benefit for another financial year can boost the chances of more people coming under the umbrella of this scheme. This in turn will support the government’s motto - Housing for all by 2022.
Increase the upper cap on health insurance premium
2020 served as a wake-up call to everyone that health insurance is a necessity, not an option. Taking advantage of this momentum, the government should encourage people to buy health insurance by increasing the upper cap on health insurance premiums under section 80D.
Remove LTCG tax on equities
Ever since LTCG was brought back @10% on equity gains above Rs 1 lakh in a year, tax-payers have been averse to this change, and are looking forward to the tax being rolled back in 2021. . Eliminating the LTCG would indeed boost investments in equity through the stock exchange . Moreover, as equity is generally an important asset class in the long run, investors would be further motivated to invest in long-term goals like retirement .
Reduce personal income-tax rates
Another key tax relief that the government can provide in the post-pandemic years is increasing the basic exemption limit for individual taxpayers. Such a restructure of the tax slabs will ensure that tax-payers have more disposable personal income for consumption and savings.