FY2020 has been a tough year for the taxpayer, but can we expect Budget 2021 to be a relief?
Here is a look at what changes we can expect from the upcoming Budget 2021, as the nation moves towards economic recovery after the COVID-19 pandemic.
A healthy amount of financial support will prove very essential to how the economic recovery will course itself. A relaxation in fiscal consolidation should be announced for a year, and the Finance Ministry should try to avoid an unrealistic fiscal deficit target for FY2022.
There is a need to go for a ‘fiscal deficit range’, instead of a fixed fiscal deficit target, and the deficit should be viewed from the longer point-of-view of and not be just a one-year outlook, which will improve the quality of deficit by including off-budget liabilities.
Since the whole world is currently in the middle of a global pandemic, it has opened up several weak points in the healthcare system, an overall increase in the National Healthcare Budget should prove useful with the system’s inadequacies exposed.
Efforts must be made to re-establish public sector banks (PSBs) by bringing down the Indian Government’s stakes in strong banks such as Union Bank, Bank of Baroda, and State Bank of India.
With the nation witnessing a gargantuan rise in the Work-from-Home culture, it would prove very beneficial to go on and introduce tax deductions for people who wish to continue to work from home. Commenting on the same issue, Rahul Garg, India’s senior tax partner said – “One clear thinking is at the level of small to the medium taxpayer can we look at, in view of the COVID, a deduction to them particularly for salaried employees when they work from home.”
“So whatever expenditure they are incurring working from home, which expenditure in the typical case would have been incurred in office by their employers if they were using offices to work if you allow that to be treated as giving them an entitlement for deduction and that sales tax for them. It will leave more money in their hands.”
Several experts have already suggested the generation of a major asset-monetization drive which the government has also expressed its interest in as only last week it was reported that the Government will be selling its residual stake in Tata Communications. Several other big disinvestment programs should be expected.
India’s overall exports will also be a key driver of employment generation and should be leveraged through a policy that supports greater participation in the global value chains (GVC), thereby increasing global participation.
Budget 2020 had established an aggregate monetary exemption limit of Rs 7.5 lakh in the relation of employers’ contribution to the Employees’ Provident Fund (EPF); this monetary limit should be increased from Rs 7.5 lakh to Rs 9 lakh which will result in higher savings for the employee by limiting the tax outflow.
Economists and experts in the field have voiced that policies that will create employment at the lower socio-economic levels need to be the main focus in the upcoming Union Budget as it will prove to be a very major factor in raising up the demand value.