A crucial Budget

Current policies of the government indicate that the finance minister may take necessary steps to augment health infrastructure, increase capital expenditure, boost demand, create jobs, improve fiscal position, enhance revenue etc. in the upcoming Budget which is going to be presented on February 1, 2022.

The government may increase the domain of tax exemption on investment under Section 80C of Income Tax Act because the elderly persons have faced many problems due to lack of money during the pandemic. In 2021, the number of senior citizens in the country was about 1.31 crore, which is estimated to reach 2.39 crore by 2041. There is a need to incentivise retirement plans among the population.

Though the government is encouraging people to save by providing income tax exemption on deposits under the National Pension System (NPS), more incentives are needed in this regard. Employed class is expecting an increase in standard deduction, more tax relief on health expenses, increased basic limit of tax exemption etc. With more relief in income tax, people will be encouraged to save, and they will be able to plan for retirement in a better way. The relief in income tax will also broaden the tax net, which will increase revenue and help the government in achieving the target of domestic investment.

Presently, inflation remains high in the country due to high prices of crude oil at the global level. To restrain this, the Reserve Bank of India can take expedient measures to control inflation in the upcoming monetary policy review. However, it is likely that in the upcoming budget, the government may also give some relief by cutting tax rates on petroleum products to reduce inflation. Health services around the world have become expensive during the pandemic. As a result, countries like the US, the UK and Canada are reducing tax rates on health-related products. The Indian government can also slash the current tax rates on health services to relieve the common masses, as strengthening the health sector is the most important thing today. If people remain healthy, then only economic activities will increase, and the pace of development will accelerate.

The government can also give relief to income taxpayers under section 80D of the Income Tax Act, which will be different from the relief being given in the installment of health insurance. Also, the government can reduce the rate of GST being levied on the installment of Mediclaim insurance below 18 per cent. Reducing the rate of GST on health insurance premiums will increase the demand for health insurance among people. At present, people are refraining from taking health insurance due to high taxes.

Work from home culture has become a commonplace since March 2020 when the pandemic broke out. Today, crores of private sector employees are working from their homes, which has increased their monthly expenditure. They are incurring additional expenditure on internet connectivity, office setup at home, electricity etc. Therefore, it is estimated that the government may provide some relief to them as well in the Budget.

The gap between the rich and the poor in the country is continuously widening. According to the latest data of the World Inequality Report, only one per cent of the people hold about 20 per cent of the total national income of the country. On the other hand, half of the population is getting only 13.1 per cent of the total national income. There is a significant discontent among the common masses because of the current inequality level. Therefore, it is believed that the government can impose wealth and inheritance tax on the rich to bridge the widening gap between the common man and the rich. It will also increase the revenue of the government.

The government wants to promote the use of electric vehicles so that the use of limited energy resources, such as petrol and diesel, can be curtailed to a great extent. This will reduce the import of petroleum products and will also increase the revenue of the government as the cost of manufacturing electric vehicles is less than the cost of manufacturing petrol and diesel vehicles. If the government brings electric vehicles in the priority sector, then people will be able to take loans at a cheaper rate to buy electric vehicles. Apart from this, the government will also have to make other concessions for the development of this sector, such as providing tax exemption to investors.

The government needs to provide more incentives to boost the renewable energy sector, especially to encourage investors. Its use will reduce the use of conventional fuels in the country. So, there are speculations that the government can take some important steps in the Budget to give a boost to this sector.

Furthermore, the government should allocate a large amount for the Mahatma Gandhi National Rural Employment Guarantee Act (MGNREGA), as it played a vital role in tackling unemployment during the lockdown in the year 2020. MGNREGA is a major means of employment generation in rural areas. Under this, 100 days of employment is provided by the government to the rural folks.

Now the youth are getting disillusioned with jobs. They want to be a master instead of a servant. They want to create start-ups and pursue entrepreneurship. This is also necessary because, through these start-ups, new employment opportunities will be created and the development of the country will also gain acceleration. Therefore, the government should give financial incentives to start-ups and entrepreneurs and make arrangements to provide them easy loans.

Usually, from 10-15 days before the Budget, economists and experts start making estimates about the provisions of the Budget and it is seen that some people invest in the stock market or elsewhere based on mere estimates. People should avoid investing in the stock market or in other sectors based on speculation. The Budget document is prepared in a confidential manner, due to which it is difficult to predict what kind of allocations the government is going to make. Therefore, people must make an estimate about the provisions of the Budget but avoid investing on the basis of it.

Views expressed are personal