Five personal finance expectations from FM, ahead of Budget 2022

Budget 2022: With the government's renewed focus on ease of living, a simplification of the tax regime, particularly for salaried taxpayers, could be on the cards.

Ira Puranik

February 01, 2022 / 11:03 IST

(Image: Twitter @ANI)

From increasing deductions under Section 80C and expected changes in income tax slabs to the elimination of securities transaction tax, the budget has fuelled hopes of many taxpayers still reeling from Covid-19.

Here's a concise list of five changes you can expect from the Budget, which are likely to affect your financial health:

Hikes in 80C limits For the uninitiated, Section 80C of the Income Tax Act is one of the most popular avenues for reducing taxable income by means of undertaking tax-saving investments or incurring permitted expenses. Currently, the maximum deduction allowed from the taxpayer's total income herein is Rs 1.5 lakh per year.However, keeping in mind the booming costs of living, inflation, and prolonged effect of living through the pandemic, many expect this ceiling to be raised to at least Rs 2.5 lakhs every year. This is also in keeping with the PM's recent call for time-bound delivery of various government schemes to facilitate ease of living. 2. Incentivising purchase of health insurance The necessity of having adequate health insurance coverage has never been more glaringly evident, as we step into the third year of the pandemic. In a bid to encourage more people to purchase health insurance and ensure that individuals have adequate medical cover without having to dip into their personal savings in the case of a medical emergency, the government is likely to double tax exemptions available under Section 80D, which currently stand at Rs 25,000 for insurance of self, spouse, or dependent children

3. Extension of LTA cash voucher scheme
Travel has taken a backseat as the pandemic rages and, as a result, many employees have been unable to avail of the various travel concessions made available by employers, which are also eligible for tax deductions under the I-T Act. In October 2020, the Centre had introduced an LTC cash voucher scheme, which allowed an individual to avail of the requisite deduction by purchasing/availing any goods or services via digital means which do not attract a GST of less than 12 percent.

Notably, these requisites include exemption of deemed LTC fare i.e. up to Rs 36,000 per person up to 4 family members or one-third of the total expenditure incurred, whichever is less. An extension of this scheme is highly likely until March 2023.

4. Changes in Income Tax Slabs
With the government's renewed focus on ease of living, a simplification of the tax regime, particularly for salaried taxpayers, could be on the cards. This could mean raising, almost doubling, the lowest income tax slab significantly, say from the current Rs 5 lakh to almost Rs 10 lakh without any exemptions, thereby providing a much-needed fillip and stimulus to the economy.

5. Hiking standard deductions

The current standards for deductions for financial goals like higher education of children and other recurring expenses remain woefully low in the light of spiraling inflation and cost of living incurred by workers in recent times. Potential measures could include not just increasing the present tax exemption levels, but also defining the deductible limits for popular schemes like Sukanya Samriddhi Yojana and more.