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Budget 2022: Expected deductions and benefits for salaried workers
Budget 2022 is rapidly approaching. As a result of the recent increase in COVID cases in the country, there is a greater anticipation among taxpayers that relief and deductions will be provided to individuals. The following are some significant expectations.
Income tax rates are being reduced.
Individuals are currently taxed at the highest rate of 30%. Furthermore, because of the surcharge and education cess, individual tax rates might be as high as 42.744 percent, whereas domestic company tax rates are just 25%. (plus applicable surcharge and education cess).
Given the foregoing, taxpayers would welcome a reduction in the tax rate from 30% to 25% for people earning more than Rs 10,00,000 (under the current regime) and more than Rs 15,00,000 (under the proposed regime) (under the new regime).
Limits on certain deductions and exemptions are being raised.
The cost of living is fast rising, resulting in increases in children’s tuition fees, medical bills, and rental expenses, among other things. The following adjustments will improve the amount of disposable income available to middle-income households and encourage them to invest:
Increasing the deduction limit under section 80C of the Act to Rs 250,000. (from Rs 150,000).
Increase the interest paid on housing loans deduction limit for self-occupied houses from Rs 200,000 to Rs 250,000.c
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The current standard deduction of 30% should be increased to 40% to help property owners who have rented out their houses during these challenging times.
An increase in the section 80D deduction limit for self (not a senior citizen) and family from Rs 25,000 to Rs 50,000, and from Rs 50,000 to Rs 75,000 for senior people, should be considered in order to boost participation in medical plans.
Extending section 80TTA relief to FD bank interest, post office schemes, and other similar schemes for the general category, and raising the threshold from Rs 10,000 to Rs 50,000.
Currently, during the contribution stage, a deduction under section 80CCD(2) is possible to the extent of 14 percent of pay if the Central Government (CG) contributes, and 10% of salary where any other employer contributes. A deduction of 15% of salary should be provided to all employees to bring parity in the deductions allowed between employees employed by CG and those employed by other employers.
Employees who work from home are eligible for a deduction.
Many firms provide reimbursements / allowances to pay these expenses because many workers now work from home, incurring additional expenses such as internet rates, rent, power, furniture, and so on.
Employees would enjoy it if the tax authorities granted an additional deduction for the Rs 50,000 ‘Work from Home’ allowance.
The deadline for filing updated India tax returns has been extended.
Previously, the due date for filing updated returns was 12 months after the end of the Indian fiscal year, but this has been reduced to 3 months. For example, the due date for filing amended India tax returns for FY 2021-22, which was previously March 31, 2023, would now be December 31, 2022.
Some people claim credit for taxes paid in other countries on the basis of their overseas tax returns. These taxpayers would be unable to get calendar year overseas tax returns for the year 2022. This will make calculating and claiming credit for taxes paid overseas for the calendar year 2022 complicated.
Accordingly, the due date for filing the revised return of income should be continued to be 12 months from the end of India tax year.
Clarification on the taxability of interest on PF contributions made by employees
A provision was included in Budget 2022 to regard the interest on an employee’s contributions to Provident Fund (PF) exceeding Rs 250,000 as taxable. The Rs 250,000 ceiling should be increased to Rs 500,000.
A clarifying clause on whether interest on employee PF contributions is taxable at the accrual stage or at the withdrawal stage is also required.
If the aforementioned proposals are followed in Budget 2022, taxpayers will undoubtedly benefit.