All eyes are on the upcoming budget for the next fiscal year as India seeks to recover from the economic devastation caused by the coronavirus pandemic
The government should look for ways to provide tax breaks. Reuters
The pandemic and subsequent work from home policies have resulted in some employers offering allowances and reimbursements to workers. All eyes are on the upcoming budget for the next fiscal year as India seeks to recover from the economic devastation caused by it Coronavirus
Pandemic in 2020-21. It is widely expected that the government will prioritize spending in the next budget year and ensure a smooth transition to the growth area in 2021-22.
Tax experts told Firstpost what they think the government could announce as a relief for employees.
Divakar Vijayasarathy, founder and managing partner, DVS Advisors LLP
The pay class might be disappointed if they expect tax rates to drop. In fact, it should adjust to a COVID setting. However, some relief is to be expected in terms of spending-based deductions, which are more in line with the alternative mechanisms envisaged for LTA during the Atmanirbhar Bharat package to improve domestic demand. The deductions may be more available for spending, unlike the past investments. An increase in health insurance deduction and hospital stays related to COVID are expected. Given the moratorium slated for six months during the pandemic, there could be a retrospective change in deductions for home loan interest and principal repayment.
Harsh Bhuta, Partner, Bhuta Shah and Co LLP
The finance minister should consider reintroducing a unified tax plate structure and raising the minimum taxable income threshold from Rs 5 billion to Rs 7.5 billion. In addition, allowances / reimbursements from employers to workers from home (WFH) should be expressly made tax-free in the hands of the employee and allowed as business expenses in the hands of the employer. Boost for research and development (R & D) – The weighted deduction in accordance with Section 35 (2AB) of the Income Tax Act should be reintroduced at 1.5 to 2 times the expenditure.
The 2021 budget should fund the data infrastructure, and AI startups should receive specific tax breaks and grants. The holding period for capital gains from debt-oriented growth funds should be reduced from the current 36 months to 12 months so that they can be considered long-term capital assets. The interest rate for long-term capital gains on real estate assets should be reduced from 20 to 10 percent and the holding period from 24 to 12 months.
Ashok Shah, founding partner of NA Shah Associates
Due to the introduction of Work from Home (WFH) standards, taxpayers face additional costs. There is no clarity as to whether these costs will be charged as business costs. Many expenses are also not reimbursed by employers, such as B. increased utility bills, internet charges, etc. Many countries around the world have recognized this and provided taxpayers with guidelines for recovering such expenses. For example, Australia has issued the following guidelines for claiming work from home expenses:
Expenses that the taxpayer can claim:
- Electricity bills for heating, cooling, and lighting the area you work in and for running items you use for work
- Cleaning costs for a specific work area
- Telephone and internet costs
- Computer consumables (such as printer paper and ink) and stationery
- Home office equipment, including computers, printers, phones, furniture, and home furnishings – you can claim the full cost of either items up to $ 300
- Depreciation (depreciation) for items over $ 300.
Expenses that the taxpayer cannot claim:
- The cost of coffee, tea, milk, and other general household items that your employer may have provided for you at work
- Costs related to children and their education, including setting up for online learning, teaching at home, or purchasing equipment such as iPads and desks
- Items that are reimbursed, paid for directly by the employer, or the depreciation of items provided by the employer – for example, a laptop or a phone
- Time that you spent not working, e.g. B. Time spent with children at home or on lunch break
- Occupancy costs such as rent, mortgage interest, water and prices.
COVID cost deduction: Due to COVID, the medical costs (CT scan, COVID tests, etc.) and costs related to quarantine / self-isolation in COVID centers / hotels have increased significantly. Current tax law does not provide for any benefit from these expenses for taxable income. Therefore, the government should allow a deduction for medical expenses when calculating the taxpayer’s income.
Anuja Bhargava, Head of General Counsel Operations at Fidelity International
India sees a great opportunity in 2021 to arouse the interest of foreign investors. Foreign investors strive for a stable tax system with competitive tax rates. FM might consider switching to the previous tax system, where long-term capital gains from the sale of publicly traded stocks that are subject to the STT and are tax exempt could be a big boost to attract investors. To encourage long-term patient capital flow to India, the holding period could be extended from one year to two years to be considered long-term. This change would be welcomed by the FPI and could help guide the government’s divestment agenda. A reconsideration of the TDS provisions for dividend FPIs needs clarification to allow the tax treaty rate to be applied in line with other overseas investors.
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