Union Budget 2021 Expectations for Tax Relief: Before expecting any tax relief, the current economic situation should be factored at this moment.
Union Budget 2021-22 Expectations for Income Tax Relief: While Prime Minister Narendra Modi government has turned almost every stone to spur growth in the Indian economy amid the lockdown, expectations, if any, of further tax relief seem unrealistic at this point. The corporate tax rates were cut before the pandemic to 22 per cent from 30 per cent for companies that do not seek exemptions, and to 15 per cent from 25 per cent for new manufacturing firms. Besides, the government had also introduced a new personal income tax regime in the last budget that aimed to cut tax liabilities for those who did not claim exemptions.
Corporate tax relief
“Before expecting any tax relief, the current economic situation should be factored. GDP is expected to contract by around 8-10 per cent and fiscal deficit is at record high. Further, large scale expenditure on vaccination is on the cards, and on the other hand, there is a need to increase government spending especially capital expenditure,” Divakar Vijayasarathy, Founder and Managing Partner, DVS Advisors LLP, told Financial Express Online.
In this backdrop and with limited avenues to garner resources, expecting large scale tax relief would be too fictitious, Vijayasarathy added. However, investment based relief and flexibility in terms of setting off of loss can be expected, he further said.
Personal income tax relief
The effect of the new personal income tax regime is yet to be seen as it came into effect from 1 April 2020. While the higher slabs may not see any relaxation, the lower slabs are expected to get some relief. “On the individual front, tax for the higher strata would remain unchanged but there could be some relief in terms of adjustment in tax rates or increase in limits for the lowest slab,” Vijayasarathy underlined.
However, any relief given on the tax front will add burden to the government’s revenue. “Individual taxpayers would greatly benefit from reduction in personal income tax rates. This would increase cash in hand for them, combined with other measures this could boost consumption in the economy, leading to overall growth and improvement in the economic situation,” Archit Gupta, Founder and CEO – ClearTaX, told Financial Express Online. However, given that the government will likely be in an unfavourable fiscal situation, this will be a strain on the exchequer, Gupta added.
