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Budget Expectations in India 2022

02 February 2022

With the budget day (Feb 1) almost upon us, there could be announcements of new schemes, changes to the existing ones, and other tax sops favouring both individuals and companies. Therefore expectations from this budget are aplenty. 

Budget Expectations For Individuals

In this blog, let’s look at what all the salaried and other individuals expect from the budget. 

Deductions

To encourage savings and increase the flow of money towards essential aspects such as education, the Government allows taxpayers to decrease the taxes they are liable to pay. The ‘deductions’ up to a certain limit reduce the individuals’ tax burden. 

Here are the expectations around deductions from this budget:

Increase in the standard deduction 

Individuals are expecting this year’s budget (2022-23) to increase the standard deduction from the current limit of Rs 50,000. Some are specifically expecting it to be at least around Rs 75,000. 

For instance, if an individual’s salary is Rs 6,50,000, the individual can deduct Rs 50,000, and Rs 6,00,000 will be the taxable income. 

Deductions related to work-from-home expenses

With the outbreak of the pandemic, work-from-home became a norm. And many individuals have to spend a lot to ensure an office-like environment at home. Individuals, particularly salaried workers, expect to claim deductions for these expenses from this year’s budget. 

Increase Mediclaim insurance limit 

Since the outbreak of Covid in 2020, many have taken health insurance policies. At present, individuals and HUFs can claim deductions on health insurance up to Rs 25,000. It is Rs 50,000 for senior citizens. So they are hoping the budget will increase this limit.  

Increase in Section 80C limit

One of the expectations from this budget is to increase the limit of deductions allowed under Section 80C. The last increase under this was in the FY14-15 budget. It was raised from Rs 1 lakh to Rs 1.5 lakh.

Section 80 C allows taxpayers to claim a deduction from their total income if they have invested in Public Provident Fund, ELSS funds, or any other investments that qualify for deductions under Section 80C of the Income Tax Act. 

Other expectations on deductions 

    1. Taxpayers expect standalone deduction limits for education-related savings
    2. Deductions related to covid-19 treatment or covid-19 specific health policies are also expected in this year’s budget. 
    3. Increase in deduction limits related to home loans and education loans. Under section 80EEA, first-time homebuyers can avail additional Rs 1.5 lakh interest deduction on home loans. This benefit was extended until March 31, 2022, during Budget 2021. 
    4. New Regime: Most salaried employees receive House Rent Allowance, which lowers their taxes as house rent is allowed as an exception under section 10(13A). It has been a recommendation of many people who live in rented places that exemption for HRA should be increased or allowed to the taxpayers who also wish to opt for the new regime. 
    5. Few reports claim that taxpayers want standard deduction in the new regime as well.

Budget Expectations for Companies

Overall, it is expected that the government will speed up the process of strategic disinvestment and PSU privatization. This along with the additional push for the ‘Make in India’ initiative through incentives and subsidies across different sectors is expected. 

Asset monetization, higher disinvestment, and Production Linked Incentive (PLI) schemes are also likely to be important factors to look out for in the budget.  

Let’s have a look at what different sectors are expecting from this budget: 

Budget Expectations For Different Sectors

Infrastructure, and Real Estate

In order to speed up the construction of highways and expressways, a higher allocation to the Ministry of Road Transport & Highways is expected. Additionally, ease in land acquisitions, environment and other clearances and smooth financing is key to achieving the National Infrastructure Pipeline targets. 

The budget is likely to continue its focus on increasing affordable and rental housing projects. It is likely to unveil programs to provide liquidity to stuck and unsold real estate projects.

Pharma, and Healthcare

Following the pandemic’s effects, a raise in public investment in healthcare infrastructure would be a welcome move. 

Services sector

Travel, hotels, and other service sector businesses have been severely hit due to the pandemic. It is expected that the budget will focus on this sector with the aim of reducing their financial stress. 

Further, for the aviation sector, a reduction in import duty on aviation turbine fuel and reduction in charges such as landing charges and parking charges may be discussed in the budget. 

Auto sector

The primary focus of the auto sector this time will be to see how the budget aims at accelerating the adoption of EVs in India. 

The EV charging infrastructure segment too is expected to receive a boost. With companies such as Tesla expressing interest and the bottlenecks for investments, a reduction in import duty on fully built EV units may also be included in the budget.

Schemes around the domestic production of important parts such as semiconductors may also be a factor to look out for. 

Banking

The government is expected to continue on its privatization targets and a clarity on the roadmap of the privatization of PSU banks will be a welcome addition to the budget. 

FMCG & Retail

Following WHO’s guidelines to raise taxes on cigarettes, the budget may increase excise duty on cigarettes and tobacco products. 

Education

The education sector saw a reduction of 6% in the annual allocated spending in the previous budget. This time, many in the sector expect the budget to increase the allocation.

Clarity and regulations on online education platforms is also expected.  

Oil and Gas

To provide a push to green and sustainable energy, incentives for the expansion of gas infrastructure will be an expected addition to the budget. 

Startups 

The startup industry has witnessed significant growth over recent years. 

Many in the industry are now expecting a further push through means of ease of business, tax incentives, reduced compliance cost and other related factors. 

The announcement of ‘National Startup Day’ is a welcome move for the startup community. The sector expects to be an important factor to look out for in the budget. 

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