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The much anticipated Budget 2022 will be tabled in the Parliament next week. Day by day, the curiosity surrounding it is spiking amidst the entire nation, and salaried employees are no different.
During this Covid pandemic, many salaried taxpayers have faced pay cuts or at worse, lost their jobs and are struggling to get a new one.
So, it’s natural for the salaried sector to pin high hopes from the upcoming Union Budget 2022, isn’t it?
Let’s have a look at some of the expectations salaried employees have from Budget 2022.
1. Lower Income Tax Rates
Who doesn’t wish for lower income tax rates? Surely everyone wants to lower their tax outgo, right?
- That’s why, just like many previous years, one of the biggest expectations from the Union Budget remains the reduction in income tax rates, as a lower rate on this direct tax will give more disposable income in people’s hands, which ultimately contributes to circulating money in the economy and raising demand for goods and services.
- This is especially important for the old tax regime’s tax rates, as that regime offers a long list of exemptions and deductions like LTA, HRA, Section 80C and 80D, standard deduction etc. which are not present in the new tax regime.
- Moreover, lowering the tax rate is also vital because not only has the government reduced the corporate tax rates in the past few years but also because the highest tax rate for both these regimes is the same, i.e.30%, which further touches a huge 42% mark when surcharge and education cess are added, hence digging a big hole in the pockets of high earners
2. Increase Standard Deduction Limit For Higher Disposable Income
- Salaried employees who have opted for the old tax regime must be getting the benefit of ₹50,000 standard deduction. This deduction was introduced in Budget 2018 at ₹40,000 and then next year in Budget 2019, this deduction’s amount was raised to the existing ₹50,000.
- Salaried employees are now expecting a further hike in the standard deduction limit to gain more money in their hands. This would be a much-needed relief, especially during the ongoing pandemic-induced uncertainties and adversities.
- Moreover, this is also expected because the net direct tax collection by CBDT has increased year on year at a robust pace of more than 60%, so the income tax department might consider extending its benefits to the taxpayers as well!
3. Clarity On Taxability Of Interest On Employee’s PF Contributions
- Last year’s Budget 2021 had announced a provision to consider the interest to an employee’s annual contributions exceeding ₹2.5 lakh to Provident Fund (PF) as taxable. Firstly, salaried employees expect this limit to be increased to say, ₹5 lakh.
- Secondly, a clarificatory provision is required regarding whether the interest on employee PF contributions should be considered as taxable at the accrual stage or withdrawal stage, which at present is unclear.
4. Introduce ‘Work From Home’ Allowance
- Taking into consideration the pandemic-induced circumstances for over 2 years, wherein lots of employees have been working from home across various businesses and sectors, the government should introduce an additional deduction in the form of ‘work from home’ allowance and keep it tax-free in the upcoming Budget 2022.
- And with many companies either opting for hybrid working models or even announcing complete WFH for an indefinite period, this allowance will be helpful for employees who are working from home and incurring related expenditures, such as internet charges, electricity, furniture, etc.
