Budget 2022: 6 Things Salaried Class Wants

Individual taxpayers have higher expectations from Budget 2022 in terms of rationalisation of provisions.

The Covid-19 pandemic has led to a dramatic loss of human life worldwide and poses an unprecedent challenge to public health, employment and economic progress. Policymakers have a tough task on their hand to bring the economy back on track and start building a future of work that is safer and more effective in mitigating the consequences of the crisis on jobs and income of taxpayers.

Amidst this crisis, individual taxpayers, who contribute almost 35-40% of direct tax revenues, have higher expectations from Budget 2022 in terms of rationalisation of provisions, ease of compliance etc., as these will help them to cushion the economic damage caused by the pandemic.

1. Increase threshold under eligible investments to claim deduction: Currently, deduction to the extent of Rs 150,000 on investments made in eligible categories are allowed. Given the multitude of provisions – life insurance premium, deferred annuity, contributions to provident fund, subscription to certain mutual funds, equity shares or debentures, expense as tuition fees, etc. – it is only fair to individuals to have this cap increased to Rs 250,000.

2. Revision of threshold to tax interest income on Provident Fund: The preceding budget introduced to tax interest arising on PF contributions made that is upwards of Rs 250,000 a year (in case of employer contribution). To encourage social security savings, it would be a fair ask to up the thresholds to Rs 400,00 a year.

3. Clarity on Crypto taxation: Considering cryptocurrency as an investment medium has gained huge traction in India, it is essential that the Budget clarifies the ambiguity regarding taxation of crypto and clearly spells out the provisions relating to new age investments or carrying-out business transactions. This will provide the much-needed clarity to millions of investors/businesses in India and may also pave the way for new-age technological advancements in the country.

4. Changes to be made to the new tax regime under Section 115BAC: It is undeniable that the government has provided significantly slashed tax slab rates under the new regime. However, all the significant/major/recurring exemptions and deductions allowed under the old regime – HRA, LTA, standard deduction, Chapter VI-A deductions, etc. – have been denied to the individuals opting for the new tax regime.

It would be a significant move for the salaried demography if the government amends provisions to include one/few of these major exemptions/deductions, evaluating whether providing even one significant incentive to such individuals opting for the new tax regime is substantiable. This would attract a big part of the salaried demography into the tax paying initiative.

5. Deduction from income under ‘house property': At present, the loss arising on claiming interest deduction from house property income can be set off against other heads of income (such as salary, capital gains, professional income or income from other sources) up to Rs 200,000. Further, any carried forward loss cannot be set off in subsequent years against other heads of income except the income from house property. This results into lapse of such carried forward losses due to higher interest payment in subsequent years as well. Hence, the government should increase the maximum limit of such deduction from Rs 200,000 to Rs 350,000 per annum.

Further, the existing provisions don't allow the deduction of maintenance charges paid to society etc. It is recommended to insert a new provision to allow such deduction against the rental income earned so that only real income is taxed in the hands of taxpayers.

6. New category of deduction towards work from home (WFH): It's been a continuous ask from employee's working from home incurring expenses for setting-up a home office space to be eligible for a WFH deduction of Rs 50,000 annually irrespective of tax regime opted. Just to give perspective, the UK government has provided a flat rate of GBP 6 per week of tax relief towards additional household cost to people WFH.

Budget 2022 has managed to grab every person's attention as there aren't any wrought-down, concrete changes that is expected for the common man and it is mostly a guessing game at this point. It will be exciting to see the changes that will be presented this time.

(Disclaimer: These are the personal opinions of the author.)