It is that time of the year when tax finds its place in dinner table conversations and with the Budget due on February 1, individual taxpayers, bruised by disruption caused by the pandemic, are ready with their wish list.

Relief on covid treatment

Through press release of June 25, 2021, the Centre had extended a helping hand to Covid patients. The Government had announced that any financial assistance received by Covid patients from their employers and well-wishers during FY 2019-20 and subsequent years for meeting the expenses of Covid treatment would be exempt from income-tax. Similarly, any financial assistance received by the family members of taxpayers who lost their life due to Covid had been exempt from income-tax. The exemption to family members was allowed without any limit for the amount received from the employer of the deceased and up to a limit of INR 10 lakhs for the amount received from any other person. Taxpayers will be hoping that corresponding legislative amendments in this regard, which have not yet been made in the IT Act, are provided for in the upcoming Budget.

No perks in WFH

Technological advancement has allowed employers to offer a work from home (WFH) option to its employees during the pandemic. The equipments required to exploit these technological advancements, such as internet, laptop, headphones, furniture etc, come at a cost. Employers have been willing to bear the costs of remote working to keep their businesses running smoothly. However, it is uncertain if the value of WFH equipments provided by an employer is to be treated as a taxable perquisite in the hands of the employees by the taxman. Salaried taxpayers are hoping that the Budget provides a specific income-tax exemption to the value of WFH equipments received from employers.

More tweaks required

The new (alternative) personal tax regime introduced by the Government in Budget 2020 has not found many takers, since it mostly benefits only those with high levels of income. The new regime also does not allow a taxpayer to claim deductions from taxable income. To make the new regime attractive to taxpayers and at the same time not diluting the intention of introducing a simplified tax regime, the Centre could consider providing a set of specific deductions to the taxpayers even under the new regime. Premium paid for medical and life insurance, interest on home loan, house rent allowance, standard deduction and leave travel allowance should continue to be available as exemptions or deductions under the new regime. These deductions also play an important role of encouraging taxpayers to adequately insure themselves and spur investments in capital markets.

Factor in inflation

The IT Act provides a standard deduction of INR 50,000 from salary income. Salaried employees are hoping for an increase in the standard deduction to leave them with additional income to navigate through the disruption caused by the pandemic. Increase in global commodity and fuel prices have created inflationary pressures on the economy. Borrowing a concept from taxability of capital gains, standard deduction could be linked to the cost inflation index for reducing the impact of the increased rate of inflation on taxpayers.

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What do taxpayer want from the Budget

Raising the bar

The threshold limit of deduction available under Section 80C of the IT Act has remained unchanged since 2014. Taxpayers are keeping their fingers crossed and hope that the Finance Minister breaks the trend by increasing the existing limit at least this time.

Besides, the burden of medical bills incurred by a majority of the population due to the pandemic would be relieved to a large extent if the Centre provides an additional deduction under Section 80D of the IT Act for any expenditure incurred by taxpayers towards treatment or testing for Covid.

Clarity on crypto

It is likely that the crypto bill will miss the Budget session of the Parliament. Will the Finance Minister surprise taxpayers by pulling a rabbit out of her red 'bahi khata'? As many as 10 crore Indians with crypto investments will be hoping for clarity on the gamut of tax issues surrounding crypto transactions.

It will be interesting to see how the Finance Minister finds a balance between the urgent need of increased government spending to get the economy back on track and on meeting the expectations of taxpayers. Needless to say, the Centre has its task cut out.

The writer is a Partner at Nangia Andersen LLP (with inputs from Amita Jivrajani and Ankur Agarwal)