Union Budget 2021: What taxpayers can expect from FM Nirmala Sitharaman on the personal tax front

Union Budget 2021-22 Expectations for Taxpayers: One of the most eagerly-awaited annual policy announcements by the government in the last quarter of the fiscal year – Union Budget – is around the corner. With a few weeks to go, similar to every year, individual taxpayers are really hoping for a Budget which leaves more money at their disposal. This is especially considering the hardships and challenges caused by the COVID-19 pandemic on their livelihood and on overall economy.

From the government’s perspective, in addition to the reforms already announced, several measures particularly to boost domestic consumption of goods and services and to revive the economy at a faster pace should be evaluated from a holistic perspective.

The wish list on the personal tax front emanating from COVID-19’s adverse impact and other circumstances is as under:

Separate deduction for COVID-19 treatment

Currently, a few deductions have been prescribed under Chapter VI-A of the Income-tax Act, 1961 (the Act) for medical treatment for self or dependent suffering from disability/severe disability (Section 80DD, 80U of the Act), medical treatment of prescribed diseases and ailments (Section 80DDB of the Act). However, there is no specific deduction under the Act which covers treatment cost for COVID-19 patients who are not covered under any health insurance.

Donation made to the PM CARES Fund designed specifically for providing COVID-19 relief is eligible for 100 per cent deduction u/s 80G of the Act, but no corresponding deduction has been notified for expenses incurred on treatment of disease itself.

Given the substantial cost involved in COVID-19 treatment in government or private hospitals, a separate deduction capped up to INR 1,00,000 or actual treatment cost incurred by the taxpayer for self or family, whichever is lower, may be considered to be introduced under the Act to provide much-needed relief to the taxpayers specially when such costs are not covered under a health insurance policy.

Provision for furniture by employer

Outbreak of the COVID-19 pandemic in March 2020 in many ways compelled organisations to implement Work from Home (‘WFH’) policy for their employees during the lockdown period and post thereto. During such WFH situation, several companies endeavored to put in place necessary enabling infrastructure through provision of furniture (like tables, ergonomic chairs, etc.), high speed internet, printers, desktops, stationery, etc. for ease of working at their employee’s residences to ensure conducive work environment.

Some companies decided to grant a fixed allowance to employees to meet the expenditure on such furniture/ other items, while others decided to provide a reimbursement. While both the allowances and reimbursements are necessitated by the business requirement, these benefits have the potential of being taxed in the hands of the employees as a perquisite.

As this situation has not been expressly dealt with in the Act or the Rules made thereunder coupled with a fact that WFH on a large scale appears to be a long-term norm now, some tax relief specific to work from home scenario may be provided to an individual taxpayer and their employers…Read more>>