Union Budget 2022: What market expects from FM Sitharaman

Nirmala Sitharaman, the Finance Minister, will submit her fourth Union Budget on February 1st. The novel coronavirus type that has entered India is expected to have a negative impact on the economy this year. This will be reflected in the financial markets, which have become more volatile in the run-up to the annual event. Any initiative to reduce stock transaction fees might mitigate the impact of any potential market downturn now that the market is approaching its all-time high.

Here’s what market professionals have to say about what they anticipate from the next Union Budget

One expert said, “The market expects a reformist and pro-growth Budget, similar to last year’s, which was a step in the right direction. As a result, the forthcoming Budget must provide further impetus for reforms and development. The government’s asset monetization and disposal policy will benefit from increased clarity and speed. The globe is suffering several supply-side concerns, and India has the potential to transform some of these obstacles into opportunities. As a result, the government should concentrate its efforts in certain areas in the next Budget.

In terms of stock market taxes, experts think STT should be repealed or at the very least lowered, given it was originally enacted to replace the long-term capital gains tax. Both LTCG and STT are now in effect, which is unfair to Indian investors. In India, stock market penetration is rising, and it is expected that the government would implement regulatory steps to make the Indian market more investment-friendly in contrast to other developing markets, with lower LTCG and STT being a solid first step. In India, transaction costs are excessively high, and LTCG and STT are considered market depressants.

According to another expert, “We anticipate that the Union Budget will place a strong emphasis on targeted expenditure while being fiscally responsible. Due to higher-than-expected tax receipts, we predict the fiscal deficit in FY23 to be significantly below the budget forecast of 6.8% in FY2022. We anticipate that the government will continue to prioritize higher expenditure and PLI initiatives to boost the rural economy and industrial sector. Given their large multiplier impact on the economy, we anticipate the government to increase funding for infrastructure and housing. We do not anticipate any substantial announcements in the Union Budget, and we think the government will continue its reform efforts even if the Budget is not passed.”

Experts said, “With the second and third waves of pandemic wreaking havoc on the Indian economy and affecting millions of people, investors and consumers alike are anticipating a strong Budget 2022. To increase investor morale, retail investors would want the STT to be decreased or perhaps repealed, and long-term investments to once again be tax-free. To survive and grow in the future year, industries such as education, hotels, travel & tourism, auto & auto accessory, and hospitality might anticipate a number of relaxations in terms of simple access to loans or tax reductions.”

Salaried people demand tax deductions and advantages

Budget 2022 is rapidly approaching. As a result of the recent increase of pandemic cases in the nation, there is greater anticipation among taxpayers that relief and deductions would be granted to people. The following are some significant expectations.

• Income tax rates are being reduced

Individuals are now taxed at the highest rate of 30%. Furthermore, because of the surcharge and education cess, individual tax rates might be as high as 42.744 percent, whereas domestic company tax rates are just 25%.

• Limits on certain deductions and exemptions are being raised

The cost of living is fast rising, resulting in increases in children’s education fees, medical bills, and rental prices, among other things. The following adjustments will improve the amount of disposable income available to middle-income families and encourage them to invest:

-Increasing the deduction limit under section 80C of the Act to Rs 2,50,000.

-Increase the interest paid on housing loans deduction limit on self-occupied houses from Rs 2,00,000 to Rs 2,50,000.

-To assist property owners who have rented out their homes during these tough times, it is suggested that the existing standard deduction of 30% be increased to 40%.

-An rise in the section 80D deduction limit from Rs 25,000 to Rs 50,000, and from Rs 50,000 to Rs 75,000 for senior people, should be explored in order to boost participation in medical plans.

-Extending section 80TTA relief to FD bank interest, post office programmes, and other similar schemes for the general category, and raising the threshold from Rs 10,000 to Rs 50,000.

-At the moment, deductions under section 80CCD(2) are permitted to the tune of 14 percent of pay for contributions made by the Central Government and 10% of salary for contributions made by any other employer at the contribution stage. A deduction of 15% of pay should be provided to all workers to bring equity in the deductions permitted between employees employed by CG and those employed by other employers.

• Employees who work from home are eligible for a deduction

Many firms give reimbursements/allowances to pay these costs since many workers now work from home, incurring extra expenses such as internet rates, rent, power, furniture, and so on. Employees would enjoy it if the tax authorities granted an extra deduction for the Rs 50,000 ‘Work from Home’ allowance.

• The deadline for submitting updated India tax returns has been extended

Previously, the due deadline for filing updated returns was 12 months after the end of the Indian fiscal year, but this has been lowered to 3 months. For example, the due date for submitting amended India tax returns for FY 2021-22, which was formerly March 31, 2023, would now be December 31, 2022.

Some people claim credit for taxes paid in other countries on the basis of their foreign tax returns. These taxpayers would be unable to get calendar year overseas tax returns for the year 2022. This will make calculating and claiming credit for taxes paid abroad for the calendar year 2022 complicated. As a result, the due period for submitting the updated income tax return should be extended to 12 months from the end of the Indian fiscal year.

• Clarification on the taxability of interest on PF contributions made by employees

A provision was included in Budget 2021 to regard the interest on an employee’s contributions to Provident Fund exceeding Rs 2,50,000 as taxable. The Rs 2,50,000 ceiling should be increased to Rs 5,00,000. A clarifying clause on whether interest on employee PF contributions is taxed at the accrual stage or at the withdrawal stage is also necessary. If the aforementioned proposals are followed in Budget 2022, taxpayers would undoubtedly benefit.

Source: Business Today

Disclaimer: This blog is exclusively for educational purposes and does not provide any advice/tips on investment or recommend buying and selling any stock.