With a new year come fresh resolutions and great expectations, but also a new budget that the Indian salaried class fears but also has hopes from—especially this year.
Last year has been particularly harsh for the salaried class who were walking a tightrope with increasing expenditure on one hand, and falling income levels on another. The reduction in income is a result of muted increments and incentives, falling interest rates, and significantly high medical expenses.
Given this scenario, the expectations of the salaried class from Budget 2022 that will be announced on February 1, are as follows:
Introduction of a deduction for work from home expenses
Due to the ongoing pandemic, most employees have been working from home since two years. They have incurred significant expenses to set up offices at home to be able to deliver work efficiently. They’ve incurred expenses for furniture, computer peripherals, broadband, telephone, electricity and more.
Although some of these expenses are reimbursed by employers, there may be thresholds specified, beyond which these costs rest with the employee. Currently there is no specific provision in tax laws that exempts such reimbursements. There is also no provision for employees to claim a deduction for these costs that they have incurred. A deduction for such work from home expenditure would go a long way in easing the burden for salaried persons.
Increase in medical insurance threshold
Last year also saw increased expenditure on medical expenses. This may be for treatment of Covid-19 and other diseases, or may be just preventive healthcare in the form of masks, sanitisers, vitamin shots or Covid-19 tests, and also increased health insurance costs. It has been observed that insurance premium for a complete health coverage for individuals has increased significantly. All these expenses have left a hole in employees’ pocket and an enhancement in the limits for medical insurance would provide some relief.
Increase in standard deduction limit
The last increase in standard deduction was done in 2019 when the threshold was increased from Rs 40,000 to Rs 50,000. Given rising inflation, we hope that the standard deduction be enhanced at least by 20 percent to 25 percent.
Re-introduction of benefits like the leave travel concession
The government in 2020-2021 introduced a scheme to provide tax exemption for leave travel concession for employees to reduce their tax burden. The scheme was introduced in October 2020 to grant an opportunity for taxpayers to claim deduction for leave travel concession even if they do not travel, provided they spend the amount on eligible expenditure. Many employees did take benefit of the scheme. If the government could look at providing such options to employees, it would provide them with tax relief.
Restore the timeline for tax return revision to one year from the end of assessment year
Advancement of timeline for tax return revision was applauded as a progressive measure for speedy processing of tax returns. The intent of permitting revisions was to allow taxpayers additional time and an opportunity to rectify any unintentional errors or lapses in the original return. With extended due dates for filing the original tax return, the timeline for revision has been crunched further. In cases where the employee is liable to tax in two jurisdictions, the filing of revised return is inevitable to claim foreign tax credit for taxes paid in another country. This is on account of difference in the fiscal years and tax filing due dates in the two jurisdictions. However, with the shortened tax filing deadline, taxpayers need to file tax returns on a tentative basis rather than on the basis of finalised returns. This has challenges in responding to the assessing officer’s questions during an audit.
The pandemic has already impacted normal life and it is necessary for the government to bring in some relief for the salaried class.
The writer is a partner at Deloitte India.
The thoughts and opinions shared here are of the author.
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