New Delhi, Jan 17 Relief to industries struggling to recover, levy of Covid cess on industries that bounced back, and reducing liquidity by increasing investment-linked deductions could be among the main themes of the Union Budget for 2022-23.
As per Budget expectations detailed by Taxmann, last year the government had announced multiple stimulus packages to rejuvenate the economy impacted by the Covid-19 pandemic.
The government followed the counter-cyclical fiscal policy to stabilise the business cycle. This policy requires the government to reduce spending/increase taxes in good times and increase spending/reduce taxes in bad times.
To a large extent, these policies helped the Indian economy recover from the recession. Typical economic recoveries happen in V, W, Z, U and L shapes. However, economists are starting to think the recovery from Covid-19 might be K-shaped.
Technology and large capital firms have recovered faster than small businesses and industries directly affected by Covid-19, such as hospitality, Taxmann said.
Though these stimulus packages have given a pace to the recovery, they also resulted in a higher inflation rate.
The US Federal Reserve meeting minutes signalled the central bank might raise interest rates sooner than expected. This is a signal that the Indian government might also think about lessening the liquidity from the market, Taxmann said.
Looking at the devastating impact of Covid-19, the Centre, state Governments, employers, friends, and philanthropists are providing financial assistance to the infected people and their families. Still, many people in the country are not getting any financial support and are fighting on their own. These people should get a tax deduction in respect of the amount they incur on Covid treatment. The government should consider giving tax reliefs for such financial assistance and provide deductions for the expenses on medical treatment, Taxmann said.
The government had issued a press release on June 25, 2021, providing that taxpayers receiving financial help from their employers and well-wishers for meeting the expenses incurred on treatment of Covid-19 would get an income tax exemption. Thus, any amount received from the employer or any other person for treatment of Covid-19 would be tax-free.
Further, if a taxpayer dies due to Covid, any financial assistance received by his family members shall be exempt without any limit where the financial assistance is received from the employer of the deceased.
However, where the financial assistance is received from any other person, the exemption amount shall be limited to Rs 10 lakh in aggregate.
It was mentioned in the release that the necessary legislative amendments shall be made in this regard in due course. However, no amendment has been made yet. Thus, the government may bring the requisite amendments in the upcoming Budget, Taxmann said.
Currently, Section 80D of the Income Tax Act allows deduction of up to Rs 50,000 from gross total income in respect of any expenditure incurred on the medical treatment of a senior citizen
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