Covid Chaos: The common man's expectations from FM Nirmala Sitharaman in 2021-22 Budget

Hit hard by the pandemic the common man is looking forward to this year's Budget to improve cash flows and enable more consumption and savings.

An enhanced deduction from the present limit of Rs 5,000 for health check-up, deductions for expenditure on medical tests and treatment is a valid and genuine ask of the common man.

2020 a year a bolt from the blue and lessons it unleashed, the common man would certainly look up to the Modi government and FM Nirmala Sitharaman for incentives, subsidies, tax cuts and other benefits to tackling the woes of the Covid-19 pandemic.

Here are some of the key hopes of the common man from Budget 2021.

1. Enhanced limits to catch up with increasing medical costs

The outbreak has set an increasing trend of health consciousness, be it mindful eating, health check-ups, and preventive treatments, which is eminent in the ongoing pandemic situation and the after-effects it carries. An enhanced deduction from the present limit of Rs 5,000 for health check-up, deductions for expenditure on medical tests and treatment is hence a valid and genuine ask of the common man.

2. Relaxation of residency conditions

The taxability of income in India depends upon the taxpayer's residence status. The Income-tax Act, 1961 ('the IT Act') provides the necessary conditions for determining the residence status of an individual with the main criteria being the length of stay in India.

With the Corona Virus pandemic outbreak, the Indian Government has taken various unprecedented measures such as declaring a nationwide lockdown, implementing strict quarantine requirements, suspension of international flights, etc. Due to these measures, many individuals who were visiting India during Fiscal Year (FY) 2019-20 for a particular duration and intended to leave India before the end of the FY were forced to extend their stay in India. Therefore it would be unfair if that stay is also considered to determine their residential status for financial 2020-21, or even beyond if such travel restrictions continue. While a circular was issued to ignore such days in determining residential status for financial 2019-20, a clarification is awaited for 2020-21.

3. Penalty in withdrawal or pre-closure of deposits and bonds

There have been soaring withdrawals from the provident fund in 2020 and which attracts tax liability in the absence of a continuous service period of five years. Hence, the condition of five years may be relaxed in cases of job loss during the pandemic.

4. Weighted deduction of expenditure

To boost consumption, a cash voucher scheme was introduced instead of leave travel concession (given the disruptions in the travel and hospitality sectors). "However, the deduction is considered if the employee spends three times the prescribed amount. The government may consider providing a deduction for two times the expenditure incurred for specific purposes to make the scheme more attractive to individuals," says Ghose.

5. Work from Home – The new normal

Work-from-home is the new normal for the salaried class who have incurred additional expenditure to meet communication and infrastructure goals. The introduction of standard deduction for such expenditure would be a welcome relief.

6. Enhanced deduction for property owners

Due to the outbreak, there is diminished demand for real estate and a reduction in rent income. Moreover, a house owner with house property income would also be incurring higher maintenance, in excess of the 30% standard deduction allowed. As support the property owners in such tried times, the standard deduction may be increased appropriately at least for the next two years.

7. Rate cuts

Budget 2020 introduced a simplified tax regime with decreased slab rates, but came with conditions. "Individuals would have to forego exemptions and deductions to enjoy this benefit. To extend the benefit of lower tax rates to a larger section of individuals, to improve the cash flow issues, the government may consider allowing some of the exemptions and deductions under the new tax regime," informs Ghose.

Finally, it may be taken into consideration that despite the numerous reliefs provided during the previous year 2020 on account of Covid-19, most of these do not directly benefit the common man. The common man is therefore looking forward to this year's Budget to improve cash flows and power more consumption and savings.