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Want to Participate in the upcoming Budget Debate. Here is what you need to know

28 Jan 2022 0 COMMENT

Introduction

Finance Minister of India Nirmala Sitharaman will table the Union Budget for 2022-23 on February 1, 2022. Each year before the announcement of the budget, the people of the country make speculations about the constituents of the budget, expected amendments, reform policies, fiscal programs, and more. People hope the government has picked up sensitive economic issues from the year gone by and aimed to rectify the situation in its upcoming budget for the betterment of everyone. However, nothing can be confirmed unless the budget approves the pre-budget speculations and the resolution is passed in the parliament. But even then, the assumptions continue until the final budget announcement is made. 

If you want to participate in the upcoming budget debate, here are some things that can help you become a part of the conversation:

Three most significant economy-level expectations from budget 2022-23

The Indian economy is on a revival path. In the second quarter of FY2022, the GDP grew by *8.4% after a successful run of 20.1% in the first quarter. In this scenario, there are three top expectations from the upcoming budget. 

  1. Strengthening of the public health infrastructure: COVID-19 is far from over. After a dreadful second wave of the virus and the rising cases in the third wave, the health infrastructure needs to be further strengthened. The impending budget will likely increase healthcare spending to ensure the country is ready for such pandemics. The maximum population is vaccinated, and there should be adequate infrastructure to take care of people during such a pandemic. 
  2. Financial support to the vulnerable population: The Pradhan Mantri Garib Yojana, a scheme that provides free food grains to more than **80 crore needy people. The budget will likely announce an extension of this scheme or new scheme developments for MGNREGA and other plans to promote rural employment and ease the economic tensions caused by the pandemic.
  3. Enhanced National Investment Pipeline (NIP): The focus will be on improving the country's infrastructure with more funds for public investment. Green infrastructure development projects may witness a rise. 

Tax rationalization

People expect the tax rate differentiation to reduce and tax rates become more rationalize. While this is not possible in one go, there is hope that the budget 2022-23 will lay the foundation for the change. 

Work from Home allowance

From the salaried class perspective, the Budget 2022-23 can introduce work from home allowance, compensating employees for the additional expenditure incurred on rent, electricity, furniture, internet, etc. 

Tax cuts

Each year before the budget, the people expect the Finance Minister to announce tax concessions, reducing the tax bill for the common people. The people expect the budget to increase the highest tax rate threshold from Rs. 10 lakh to Rs. 20 lakh. There are also anticipations that the annual tax deduction for repayment for home loans principal amount will be hiked in the upcoming budget from Rs. 1.5 lakh to Rs. 2 lakh. The soon-to-be-announced budget could also increase the standard deduction limit, hike the tax deduction for health insurance, and exempt GST on health insurance premiums, to improve social health. 

Higher tax exemption limit under section 80C

Contributions above Rs. 1, 50,000 under section 80 C are taxable in the contribution year. However, there are expectations that this limit can be increased to Rs. 3 lakh in a year.

Conclusion

These are a few of the many pre-budget speculations doing conversation rounds. However, there is no surety. These speculations cannot be relied upon unless the budget approves and the bill is passed in the parliament. Therefore, as a wise planner, it is advisable to plan your next year's investments post-budget amendments.  

*8.4% (source – NDTV as of 30th November 2021)

**80 crore (source – Deccan Chronicle as of 29th November 2021)

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