In a few hours, the Union’s finance minister, Nirmala Sitharaman, will announce her third budget in parliament. As India prepares for the 2021 budget after a year that has hit the country’s economy hard, taxpayers in the country are wondering whether they will get any relief on tax plates revision or interest rates.
Several recommendations have been made to the Center to provide taxpayers with relief on tax withholding, slabs and tax rates. However, analysts think the center is unlikely to make a big announcement regarding income tax as its finances have been badly hit due to a pandemic.
The center is unable to offer much to taxpayers as its finances were already impacted by various measures to save the economy under Aatmanirbhar Bharat in the Covid-hit year after the country was hit by coronavirus last year.
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However, the centre’s budget deficit is set to double the 3.5 percent of GDP forecast in February 2020. The center, which previously forecast an estimated national debt of Rs 7.8 billion for FY21, later revised it to Rs 12 lakh crore.
“The budget deficit will be larger than some estimated … Our revenue rallies suffered from total lockdown for the first three months and that is hard to fix,” the source told Reuters, adding, “What we are looking at is one Plus 7%. ”
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However, some changes are expected such as the tax deduction towards increased healthcare spending due to Covid-19. Analysts say the center may increase the tax exemption under Section 80D of Income Tax. The center could also set aside provisions for expenses related to Covid-19. However, clarity on these announcements could only be clear on February 1st.
The government could also focus on further streamlining income tax in the country.
In particular, the center announced in its budget for last year a “new and simplified personal tax system” with revised income tax rates and tax rates. Under the new tax system, income tax rates for those who forego deductions and exemptions have been significantly reduced. The government has announced changes to the tax plates by increasing the income tax plates, but those who take advantage of these new plates cannot receive discounts and exemptions.
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