Indians across sectors and economic classes are eager to hear what awaits in the upcoming financial year, with the Union Budget 2022 just around the corner.
The 2022 Budget comes at an intriguing juncture. On the one hand, the Government is gearing up to fulfil the $5 trillion economy dream by 2025; on the other, the central and state governments are battling yet another wave of the coronavirus pandemic along with its socio-economic consequences.
Budget 2021 focused on the retail consumer, with several new schemes and policies announced. From PM Aatmanirbhar Swasth Bharat Yojana, One Nation One Ration card to the National Education Policy, some significant announcements laid the foundation for the Aatmanirbhar Bharat vision.
Many hopes are pinned on the upcoming Budget to give the much-needed boost to the industry and empower the retail consumer as the economy reels under the pressures and disruptions of the prolonged pandemic.
Retail Customers may expect the following from the Budget 2022:
Changes in tax structure
The upcoming Budget 2022 comes with the ray of hope that there might be tax rate cuts for the average citizen, specifically the salaried class.
No such tax reliefs or rate cuts were announced in the last budget. Only senior citizens of age 75 years or more, having income from pension and deposits, were exempted from filing return of income. Salaried employees continue to be taxed at a relatively higher rate of tax, which results in lower savings. Further, adding a new tax structure under section 115BAC of Income Tax Act, 1961, offering a lower tax rate by giving up tax deductions on savings and expenses, has added to the complexity. Budget 2022 hopefully should see a rationalisation of income tax rates and tax structures.
With the rise in medical expenses due to Covid 19 and incidence of critical illnesses, the limit of deduction for medical insurance premiums and expenses under section 80D of the Income Tax Act, 1961 should ideally see an increase from the current limit of Rs. 25,000.
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Emphasis on moving domestic savings into financial assets.
India needs investments to revive the economy and drive growth after COVID-19. Investments can either come through an increase in FDI flows or higher domestic investments from Indian citizens.
However, financial literacy remains restricted, and many Indians still resort to conservative approaches to saving and investing funds. Encouraging citizens to channel domestic savings to investments and financial assets will require continued financial awareness and literacy campaigns. Adequate attention needs to be given to streamlining the process of investing in financial assets to incentivise first-time investors.
An amendment in Budget 2022 to increase the limit of tax-saving mutual funds from Rs.1.5 lakh to Rs.2 lakh will be a welcome move to increase domestic investments.
A boost for auto manufacturers and ancillaries
The automobile sector contributes approximately 7% to the overall GDP of India. This sector is under immense pressure with rising commodity prices. Additionally, the scarcity of semiconductor chips in 2021 has forced companies to reduce production drastically.
Budget 2022 may bring new policies and initiatives to revamp the automotive sector. The industry would welcome rationalisation and uniformity in GST rates on all auto parts and new policy initiatives for inverted duty structures for auto components.
Furthermore, to increase demand and augment the growth of the electric vehicle segment, Budget 2022 might roll out incentives such as reducing GST rates for consumers.
Impetus for home buyers
‘Housing for All’ is a priority that is expected to take centre stage in Budget 2022 to provide the much-needed impetus to the housing sector. Additionally, an increase in demand for housing will generate employment and support ancillary SMEs and MSMEs extensively.
The Budget might also see an increase in the tax deduction permissible on housing loans for interest under section 24(B) of the Income Tax Act, 1961, from the current level of Rs.2 lakhs. Further, it could percolate to a rise in the deduction limit under section 80C of the Income Tax Act, 1961 for housing loan principal repayment.
Additional Read – Key Things to Know about the Union Budget 2021
Investment in Infrastructure
In the upcoming Budget, infrastructure announcements may emerge as a top priority for the growth and development of India. Budget 2022 might see announcements for the development of new roads, highways, railways, hospitals, houses, and electric towers to increase Government spending while making the life of the average citizen comfortable and convenient.
Enhanced intercity connectivity is essential for forming smart cities and accelerating the pace of development of Tier II and Tier III cities. It is expected that Budget 2022 should allocate funds to introduce new technologies such as Metro Lite and Metro Neo for increased mobility.
All eyes are peeled on the Budget 2022 to give the economy a booster shot to revitalise and stimulate growth post the onslaught of the Coronavirus. The upcoming Budget might bring new schemes and policies to invigorate and encourage increased consumer spending. With new incentives for home buyers, significant tax reliefs, boosts to auto manufacturers, and investments in infrastructure, it is expected that Budget 2022 will unleash new opportunities for the retail customer.
Budget 2022 should prepare India for an economic revival and accelerate growth towards making the $5 trillion Indian economy a reality.