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The Union Budget 2021 is all set to be presented on 1st February 2021 by our Finance Minister Nirmala Sitharaman.
Everyday expectations are building up from the upcoming budget by Individuals, Corporates, Trust, etc.
The 5 most important points which can be expected by INDIVIDUALS are -
1) Increase in basic income tax exemption limit and investment limit under section 80C of the Income Tax Act,1961.
Increasing the basic exemption limit will not only provide tax relief to the individuals but will also increase liquidity and give a boost to the economy.
The deduction limit under section 80C of the Income-tax Act, 1961 (Act) for specified tax-saving investments which is currently Rs. 1.5 lakh should be increased to a minimum of Rs. 2 lakh.
2) Section 54B exemption
We hope that Section 54B exemption will be allowed even if the new agricultural land is purchased before the sale of agricultural land.
3) Increasing section 80D limit for individuals
Higher deduction in taxable income can be expected on account of increased health expenses during the pandemic. Some relief in the form of tax benefit under Section 80D of the Income Tax Act is expected.
4) Long-term capital gains on equity shares and equity mutual funds
Long term capital gains from sale of listed equity shares and equity mutual funds is exempted up to Rs. 1 lakh. Also, the gain above Rs. 1 lakh is subjected to tax at 10% (plus applicable surcharge and cess) without benefit of indexation.
The government should look at increasing the exemption limit from Rs. 1 lakh to Rs. 2 lakhs.
5) Disparity in taxation of dividend income
Although 2020 Budget removed the dividend distribution tax, the system of taxing dividend has created a disparity between the income tax paid by residents and non-residents on such dividend income.
The tax rate on dividend income earned by the non-residents is 20% which can be further reduced to 5% and 15% in case the non-resident is from a country with which India has signed a tax treaty providing for such a beneficial rate.
The tax rate on the same dividend income for residents can be as high as 35.88% (inclusive of applicable surcharges and cess). Therefore, the government should introduce a flat rate of tax applicable on dividend income.
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