The Union Budget 2021, due to be presented in Parliament on Monday, promises to be 'like never before.' The third one in two years for Finance Minister Nirmala Sitharaman, this budget aims to pave way for India's economic path after what the Economic Survey termed a 'once in a century crisis’.
Here are the key focus areas that can make this annual exercise truly for the masses:
Due to the nationwide lockdown, several industries like aviation, tourism, food and beverages, have had to bear significant losses due to no demand. Therefore, in order to provide relief to these industries, the Centre may consider extending their 8-year loss-carrying-forward window.
2. CORPORATE TAX RELIEFS
With corporate taxes rates reduced to 22% for companies and 15% for manufacturing firms before the pandemic, any further tax cuts for the corporates seem unlikely. However, in order to help firms cope up with the losses suffered during the lockdown, investment-based reliefs and flexibility in adjusting previous year losses can be expected.
3. DIVIDEND INCOME
While the 2020 Budget abolished the dividend distribution tax, the classical system of taxing dividend has created a disparity between the income tax paid by residents and non-residents on such dividend income.
4. TAX RELIEF FOR R&D
India's private sector has invested heavily on research and development in the past year due to Covid-19. Therefore, the government may consider weighted deductions for scientific research and development expenditure, especially the research and development expenditure.
5. REAL ESTATE
Amid an already slow real estate market, the pandemic and the nationwide lockdown led to a substantial fall in the fair market values of property. However, the stamp duty value/circle rates of such properties have remained the same. Consequently, even if the properties are sold at the reduced fair market value, the tax on such sale ends up being calculated on the stamp duty value of the property by virtue of anti-abuse provisions under the Income Tax Act.