A lawyer’s wishlist from Funds 2021 consists of these earnings tax rebates, deductions and holidays

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A lawyer’s wishlist from Budget 2021 includes these income tax rebates, deductions and holidays

  • Numerous industry-specific benefits and tax breaks are expected in the upcoming budget announcements.
  • The need of the hour is to increase the liquidity in the market.
  • These minor changes in the form of deductions and exemptions will have a positive impact on consumer behavior in the market for the coming fiscal year.

Every year expectations revolve around the budget and the resulting announcements. However, given the unprecedented pandemic, important announcements and easing in the form of some rest are expected from the 2021 budget. The repeated lockdowns have disrupted day-to-day operations and postponed new ventures that should be carried out in the current financial year. With such obstacles from Covid-19, numerous industry-specific benefits and tax breaks are expected in upcoming budget announcements.

The need of the hour is to increase the liquidity in the market. To do this, individual taxpayers must receive certain tax deductions to ease their tax liability. For the employee, changing the property tax exemption limit from Rs. 2.5 lakhs to Rs. 5 lakhs will severely affect liquidity in the hands of taxpayers, leading to an increase in consumption. The norm of social distancing, introduced to prevent the spread of Covid-19, certainly brought with it the convenience of being able to work from home, but shifted liability for office infrastructure costs from the hands of the organization to those of the employees. A change to the eligibility of such one-time expenses should be allowed as working from home expenses when calculating salary income for the 2020-21 fiscal year. Raising the threshold for eligibility for the payment of life insurance and health insurance premiums will encourage taxpayers to obtain higher health insurance coverage, which will in turn benefit them in this precarious pandemic. Certain changes to the ceiling on how much interest can be drawn on home loans as a deduction are also expected by the budget. In order to stimulate consumer demand, a voucher for a vacation travel concession is expected, according to an announcement in a previous press release. Such a coupon could potentially be used for goods and services purchased from registered GST vendors as the pandemic makes it unlikely to spend money on travel. These minor changes in the form of deductions and exemptions will have a positive impact on consumer behavior in the market for the coming fiscal year.

Last year, the government lowered the tax rate for domestic companies involved in the manufacturing activity on the condition that the production unit must be set up after October 1, 2019 and start production before March 31, 2023. Due to the successive state-wide lockdowns by the central government, projects stalled for several months. From the budget, it is desirable that these deadlines be extended by one to two years in order to give the manufacturing companies adequate time to set up and start up. Similarly, startups founded between April 1, 2016 and April 1, 2021 were granted three years of tax leave. The budget is expected to extend the deadline by one to two years to boost the start-up industry.

There has been an increase in the unemployment rate during the pandemic, which requires immediate attention and a plausible solution in the 2021 budget. In order to encourage job creation activities, the government introduced a provision in 2016 that a deduction of up to 90% on additional staff costs over a period of three years for the recruitment of employees who do not earn more than 25,000 rupees. This salary threshold paid to employees should be increased to Rs. 50,000. This could advance the goal of larger-scale job creation that covers a larger group of eligible people and acts as a blessing in these troubled times.

In the post-Covid-19 era, companies are expected to go through a corporate restructuring and reorganization. A number of mergers, mergers and acquisitions are expected in the coming financial year. In such a scenario, the provision of a loss carryforward of the business combination used by the merged entity should be available not only to industrial companies but also to other sectors such as real estate, e-commerce, retail, IT, start-up. Oops, etc. Similarly, a clarifying change that extends the benefit of transferring MAT credits to the merged or resultant company through the 2021 budget will provide respite for the economy.

In light of the devastating effects of Covid-19 on the economy, some countries have put in place a loss carry-back system for the 2020-21 fiscal year. In such a situation, the losses for the current financial year that cannot be claimed for positive income for the year mentioned can be traced back to the previous year (s) and will be offset against the positive income of these years. A refund can then be requested by determining the loss carryforward. The idea behind such a program is to help companies revitalize. If such a radical change is introduced through the budget, it will surely be an important boost from the government to revitalize the economy.

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Amid all the benefits expected from the 2021 budget, there are talks that the government will introduce a “Covid-19 hiring” to raise revenue for the fight against Covid-19 and use the funds raised through their vaccination campaign to prevent the pandemic from spreading. Although the Covid-19 hiring is only intended to apply to high-income people, the introduction of a new hiring in the middle of the economic crisis can further dampen sentiment.

Only time will tell how many of the above wishes will come true. One can always live with eternal hope!