BackBudget 2022: Income tax deductions and benefits that the salaried expect
Tax-free work from home allowances, Standard deduction hike are among some of the expectations o the salaried class from Nirmala Sitharaman's Union Budget 2022
PremiumBudget 2022 is round the corner. Standard deduction hike, income tax relief, tax relief for saving for kids education are among some of the expectations o the salaried class from Nirmala Sitharaman's Union Budget 2022. Some key expectations are mentioned below.
Tax-free work from home allowances for salaried employees
“The Budget 2021 may introduce tax-free work from home allowances for salaried employees. Allowing deductions for such expenses will raise the take-home salary, ultimately creating demand for goods and services in the country. Due to the high direct tax collection this fiscal year, there may be a scope to increase tax deduction limits. For instance, the standard deduction available to those with salary income may be raised, currently at Rs.50,000. This may be adjusted for inflation every year," Spokesperson - Mr Archit Gupta, Founder and CEO - Clear
Standard deduction hike, income tax relief for saving for kids' education
For paid individuals and pensioners, the standard deduction is a deduction allowed from gross salary income. This deduction lowers the individual's taxable salary income, lowering his or her tax burden as well. After being removed in fiscal year (FY) 2005-06, the standard deduction for salaried taxpayers was reintroduced from FY2018-19 onwards at ₹40,000. The deduction ceiling was eventually increased to ₹50,000 from FY2019-20.
“Given the recurrent cost of inflation over the years and the current living expenses of paid workers, the amount of deduction is relatively low. Since the outbreak of the Covid-19 epidemic, household spending has been negatively impacted by rising medical costs and work-from-home expenses such as furniture, energy, and the Internet. Thus, the present standard deduction ceiling of ₹50,000 should be increased to at least ₹75,000. Furthermore, taxpayers who choose the concessional optional regime under section 115BAC of the Income-tax Act, 1961 may be eligible for the standard deduction," says Lokesh Acharya, Director & Co-Founder, Fincorpit Consulting Private limited
The need for deduction for higher education savings for children
Saving for a child's higher education is an important financial objective for everyone, and most people set aside a percentage of their salary for this purpose.
“Except for the Sukanya Samriddhi Yojana, which is specifically for a girl child, there is currently no express deduction or exemption for such funds. Because the deduction is combined within the section 80C limit of ₹1.5 lakh per year, the tax benefits are likewise minimal. A separate deduction of at least ₹1.5 lakh for education funds would be a welcome gesture in this direction. Alternatively, the deduction for education expenses (including tuition expenses) can be carved out of the section 80C deduction and a separate deduction may be considered. In short, such an increase in standard deductions and additional deductions for education costs will bring more savings for future purposes while providing incentives for individuals through tax savings," says Lokesh Acharya, Director & Co-Founder, Fincorpit Consulting Private limited
Revised tax slabs
“Most salaried citizens would wish for relaxed tax rates or revised tax slabs but relief through lower tax rates seem wishful at this economic juncture. Reasonable expectations would include receiving relief through a higher standard deduction on the back of a pandemic-induced spike in the cost of living. Tax breaks on expenditures incurred on account of preventive healthcare expenses and insurance purchases would be greatly beneficial. Other relief measures could include expansion of 80C limits and enhanced breaks on loans incidental to large ticket purchases like homes and electric vehicles. Such enhancements can have a positive impact on personal finances as well contribute to the larger economic agenda," says Mr Nirav Karkera, Head - Research, Fisdom.
Lowering of the tax rate from 30% to 25%
The budget is creating a lot of discussion in every sector and the same is in the salaried class corridor. "Individuals are expecting a lowering of tax rate from 30 to 25 who are having an income above 10 lakh per annum, which is obvious for many reasons. Also, they expect a deduction and exemption to counter the higher cost of living including medical, children fees, rentals etc. Also, there are dozens of investment schemes solely focused to help the little savings, says Amit Gupta, MD, SAG Infotech.
Accommodations for Work From Home employees
“Accommodations for employees who Work From Home: As the Covid-19 pandemic and subsequent protocols have created an environment in which employees are today working from anywhere, they should be supplemented for additional expenses that are incurred while working from home, such as electrical expenses, internet and connectivity expenses, office furniture as well as a one-time setup cost. To address this one-time set-up cost, up to ₹50,000 for the financial year can be provided and average support expenses up to ₹5000 per month or ₹6,000 per annum can be allocated as tax-deductible expenses over and above the section 80C," says Lohit Bhatia, President- Workforce Management, Quess Corp.
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