Budget 2021: Union Finance Minister Nirmala Sithraman has promised that Budget 2021 will be one like never before. However, the International Monetary Fund (IMF), in the latest world economic outlook update said that in 2020, the economy is estimated to have contracted by eight per cent. During the peak of COVID-19, the country also struggles to sustain industries especially the micro, small, and medium enterprises (MSMEs), along with individual taxpayers who are adversely affected due to job loss and salary cuts. Some tax experts and financial planners have come up with key suggestions on Budget 2021 for the government, in order to provide relief to taxpayers. (Also Read: Tax Deductions Not Expected In Upcoming Budget, Says Taxmann )
”It is suggested that essential items should be taxed at a lower rate say one per cent and all other products can be taxed at different rate say 10 per cent. This will cover tax free items and resolve confusion regarding classification and rate of tax. This will also save the taxpayers from interest and penalties faced due to wrong classification of goods and services,” said CA Aditya M Agarwal, Partner, Mahesh K Agarwal & Co. and Secretary, Professional Times.
He added that the input tax credit of state good and services tax (SGST) paid in one state should be allowed to be utilized for payment of SGST output liability of other state. It will help in the reduction of cost and prices of goods and services. Experts also believe that the buyer’s input tax credit (ITC) should not be restricted if the seller has not remitted tax to the government, as it is unfair to penalise a genuine buyer with both tax and interest for no fault.
The government may introduce COVID cess in the upcoming budget, according to financial planners. The cess may be made applicable to higher income brackets individuals or business with specified turnovers, stated CA Aditya M Agarwal.
The Central cess collections are not shared with states under revenue devolution. Hence, the government can prefer a cess to generate funds quickly instead of raising taxes in the upcoming budget, he noted. Due to the financial stress on businesses to survive, various industrial associations representing the sectors of the economy have sought relief in terms of no new taxes to be levied, in the upcoming budget
Lastly, the present limit of sec 80C is Rs1.5 lakhs. The limit was last increased in Budget 2014 and there has been no change thereafter. ”It is expected that the same needs an updation to at least double the present amount,” said CA Aditya M Agarwal. The deduction covers the investment in life insurance premiums. Due to COVID-19, many have realised the importance of health insurance, hence the said increase in limit must be done this year amid the increase in demand from policy holders.