The COVID-19 pandemic has impacted lives across the world, changing the way people save and spend their income. With Finance Minister Nirmala Sitharaman set to present the Union Budget 2021-22 on Monday, all eyes will be on her as to what relief she can provide to the middle class. Here are the key expectations:
Change in income tax slabs
The most important thing for the middle class in the Budget is changes in the income tax slabs and rates. With the pandemic leading to salary cuts, the middle class is looking towards the finance minister to announce measures to help increase their savings. While changes in tax rates are awaited, it remains to be seen if the government has enough room for it.
Higher exemption under Section 80C
Individuals can claim tax exemption up to Rs 1.5 lakh under Section 80C on investments in life insurance premium, public provident fund, employees provident fund, equity-linked saving schemes, home loan principal amount, among others. There have been demands to increase the exemption under this section to help the middle class save more. It is widely believed that the finance minister will deliver on this by increasing the exemption limit to Rs 2 lakh.
Support for health insurance and check-ups
The pandemic has driven home the importance of health insurance and preventive medical check-ups. Currently, tax exemption up to Rs 25,000 (higher if paying for parents) is available under Section 80D for premium payments for health insurance and medical check-ups. The middle class is looking for a higher exemption limit on this front.
It is the dream of every middle-class family to own a home. With the government expected to announce sops for the real estate sector to boost economic recovery, the first-time homebuyers are looking at incentives, including higher interest rebate on home loans. Realtors' body CREDAI has also sought removal of principal repayment for housing loans from Section 80C and called for a separate exemption for the same. However, it is highly unlikely that the government will be able to fulfil this demand.
The pandemic led to large-scale job losses in the formal and informal sector. With the economy showing signs of recovery, the middle class is hoping for the government to announce measures to further boost the economy and create jobs.
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