'The salaried class could be disappointed if it’s expecting for reduction in tax rates,' said Divakar Vijayasarathy, founder & managing partner, DVS Advisors LLP
To push growth and the economy ahead, the centre is likely to bring some revenue-raising policies this year
Finance minister Nirmala Sitharaman has promised a Union Budget like "never before" in 2021. Steering the pandemic-battered economy to push growth will be challenge. Coronavirus pandemic has severely impacted economies across the globe in unprecedented ways. Thousands of people have lost their jobs or received a hefty pay cut. In the view of rising inflation, the salaried Indian middle class taxpayers are expecting some relief from Union Budget 2021 amid COVID-19 pandemic.
But, unfortunately there will not be any big tax relief in this year's Budget, the industry experts said. "The salaried class could be disappointed if it’s expecting for reduction in tax rates," said Divakar Vijayasarathy, founder & managing partner, DVS Advisors LLP.
"However, relief in terms of spending based deductions, more in line with the alternate mechanisms provided for LTA during the Athmanirbhar Bharat package to improve domestic demand, can be expected," he added.
"2020 has been a challenging year for the government and taxpayers alike. Government has been struggling with poor revenue collections, while on the other hand there is increased pressure to make investments in infrastructure projects to generate jobs and push the economy ahead. Another pressing need is to implement a nationwide COVID-19 immunisation program," said Archit Gupta, founder and chief executive officer, ClearTax.
"With this backdrop, it would be unfair to expect any tax reliefs," he further added.
To push growth and the economy ahead, the centre is likely to bring some revenue-raising policies this year. "If the direct tax collections during the tax filing season and advance tax collections have been below mark, the government may introduce measures to increase taxes," Gupta added.
The government may introduce a coronavirus cess or surcharge on higher income taxpayers in the upcoming budget said experts. "The government may choose to bring in a coronavirus cess or some other similar cess of between 2-4%," said Gupta.
"This cess may be made applicable to higher income brackets to cover for the money spent on meals and other assistance to the poorest during coronavirus as well as the costs involved to vaccinate everyone in 2021 and further. It is likely that businesses may face this cess if not individuals," he added.
"Increasing the 80C deduction could help the government shore up money to fund infrastructure related projects however interest payouts and corresponding decrease in tax collections will make it harder to implement," Gupta mentioned adding "We are not expecting any sort of big tax relief."