While the ongoing pandemic has put pressure on the government, these measures may be considered on the personal tax front to provide some relief to the individual taxpayers.
Individuals are the 'silent' and 'dedicated' taxpayers and are an important force in nation building. It may not be incorrect to say that they roughly work for about three to four months every year for the government/tax department (if we sum- up all the taxes they end up paying - personal income-tax, GST on goods and services consumed by a household) and then they work for themselves i.e. to earn whatever is left after tax deduction on salaries/paying other taxes.
Personal Income-tax constitutes about 44% of the direct taxes collection in India and about 22% of the total tax (direct tax, GST etc.) collections for the government.
Therefore, it is an important component of the tax kitty. While the ongoing pandemic has put pressure on the government, the following measures may be considered on the personal tax front to provide some relief to the individual taxpayers:-
- Reduction in the overall effective tax burden, either by increasing the tax slabs or by reducing the tax rates. It is evident that any money left in the hands of the households is effectively spent on consumption or investment, both of which add to the growth of the economy. It may also be worthwhile to give the optional tax regime a facelift to make it more attractive for taxpayers.
- There have been talks of providing an exemption on the benefits provided by the employer to the employee for setting up of home offices. An overall limit may be set akin to the standard deduction or the standard deduction limit of Rs 50,000 may be suitably increased to take care of these increased expenses.
- Popular benefits under Sec 80C (insurance, PPF etc.), Sec 80D (medical insurance) may be enhanced to boost certain specific elements of consumption/investment like to promote medical insurance habit in the country. Adequate medical insurance coverage has also assumed a lot of importance due to the ongoing pandemic. Further, to refresh our memories, life insurance became popular largely due to Sec 80C tax benefit.
- Interest on housing loan taken by an individual may be enhanced. On one hand, it will support individuals, through tax measures to buy house property and on the other hand, would provide a boost to housing and infrastructure sectors. This in turn will have a spiral effect on other allied industries like cement, steel, transportation and generate employment for semi-skilled and unskilled workers.
- Taxation on ESOPs may be shifted to the point of sale of shares, in all cases, as it creates cash flow issues in form of taxes on perquisites. While some relief was granted in case of certain start-ups, that is not adequate.
These five measures could help reduce some problems being faced by the individual taxpayers in these taxing times.
This article was originally published in Business Today.
