Expectations From Union Budget 2021.

31st Jan 2021

The union budget 2021 is just around the corner and everyone is excited about this budget as the Finance Minister Nirmala Sitharaman has promised 'a budget like never before'.

So here is what you can expect from the budget:

1. Increase in basic income tax exemption limit and investment limit under section 80C

The basic income tax exemption limit needs to be increased from ₹2.5 lakh to ₹5 lakh. The immediate expectation is to reduce the burden on taxpayers to increase liquidity and boost the economy.

The deduction limit for specified tax saving investment which is currently ₹1.5 lakh under section 80C of the Income Tax Act, 1961, should be at least increased to ₹2.5 lakh.

2. Increasing section 80D limit for individuals

Section 80D of the Income Tax Act, 1961, allows a deduction for medical expenditure incurred on senior citizens. This deduction can be claimed by senior citizen himself/herself or his/her if the children if the latter are incurring medical expenses for their senior parents.

With the Covid-19 pandemic, the medical insurance coverage was found to be inadequate for families, the deduction for mediclaim coverage for non-senior citizen should be increased from ₹25,000 to ₹50,000 and for senior citizens from ₹50,000 to ₹75,000.

 

3. Long-term Capital gains on equity shares and equity mutual funds

Long-term capital gains tax which has been heavily criticized should see a change in this budget.

Long-term capital gains from the equity shares and equity mutual funds are tax exempted up to ₹1 lakh. The gain above ₹1 lakh is subjected to tax at 10% (plus applicable surcharge and cess) without the benefit of indexation.

The government should look at increasing the exemption limit from ₹1 lakh to ₹2 lakh for retail investors or the government may also look at reducing the tax rate to 5% to give a boost to the capital markets.

4. Health care sector to get the attention it requires

With the Covid-19 pandemic, the need for a proper health care system especially in tier II, III, IV cities and in rural areas has been realised.

Currently, the benefits of the deduction for CAPEX are extended only to hospitals having a minimum capacity of 100 beds. No benefits are provided to encourage the setup of smaller hospitals in rural areas.

So the benefits under section 35AD of the Income Tax Act should be extended to hospitals having:

• Minimum of 50 beds in tier II, III, IV cities and
• Minimum of 25 beds in rural areas.

5. Building a strong primary and preventive health care system

Health care sector should be accorded 'National Priority' status to bring the required attention and investment. Primary and preventive care is vital for a strong healthcare system.

Tax exemption on preventive health check-up should be raised from the current ₹5000 per person (₹7000 for senior citizens) to ₹20,000 under section 80D of the Income Tax Act.

6. Relief for Real Estate sector

The real estate sector of India has been facing liquidity issues for a prolonged period of time now and the sector was also hit hard during the Covid lockdown. The Finance Ministry during the upcoming budget must come up with proactive measures and incentives to help the industry gain a sustainable momentum for recovery.

Also, an aspect that needs to be looked into is the accountability of authorities, they must be analysed by RERA since delays in granting permissions impact the delivery timelines of projects, which further brings liquidity crunch for the developer and negative sentiment among the buyers.

7. Incentives to provide a big push to Renewable Energy

The government needs to focus on creating a more favourable green energy ecosystem backed by a robust manufacturing ecosystem, to make it cost-competitive.

Today, more than half of the components used in solar projects in India come from China.

India must start building massive capacity increases in the components supplier ecosystem which can happen only if there is a strong financial support system as the renewable energy projects are capital intensive.

We need greater incentivisation of local manufacturing, these can be in the form of direct incentives to manufacturers such as interest subvention on term loan working capital loan, lower power cost and export incentives from 2% to 8% under Remission of Duties or taxes on the export product.

We also need to strengthen our power distribution infrastructure. DISCOM's ( Power Distribution Companies) within the Indian power sector continues to be the weakest link that needs to be addressed more seriously. 

8. Incentives to boost Farmer's Income

We expect concentrated efforts towards incentives or subsidies or creating state-owned infrastructure to provide cheaper inputs to farmers such as seeds, fertilizers, pesticides etc.

This will help contain the cost and increase profitability on produce. The budget will likely continue to expand allocation towards fertilizer subsidies or also provide a direct benefit scheme for the sector such as financial help schemes for farmers which will enable them to access more credit at cheaper rates.

These are our expectations from the budget.

We hope the Union Budget 2021 will help the Indian economy to bounce back to the pre-Covid levels.

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