Union Budget 2021: What to expect?

A key financial event every year is the Union Budget. However, this year the anticipation is manifold as the country is urgently in need of a booster dose of stimulus measures to revive the economy rattled by the COVID-19 pandemic.

Let’s take a look at what to expect from Finance Minister Nirmala Sitharaman’s budget on February 1.

It is vital to increase disposable income, especially among the middle class, to boost consumption and fuel the economy's growth.

To achieve this, Sitharaman may make some favourable changes in the income tax slabs.

There has been widespread demands that the income tax slabs be raised to at least 3 lakh rupees, to reduce the tax burden on those in the Rs 5 lakh per annum income group. Several media reports suggest that Sitharaman may announce something on those lines.

In 2018, exemptions on medical allowance reimbursements were withdrawn. Now, with rising healthcare costs, there is increasing demand for reinstating this.

The Sensex which was at 26,000 in March 2020 went on to touch 50,000 just in a matter of 10 months. Such fluctuations were not seen anywhere else in the world. In this background it is likely that the demands to repeal the long term capital gains tax will be considered. The Narendra Modi government had introduced a 10 percent capital gains tax on income above Rs 1 lakh from sale of equity shares held more than a year. This was perceived as a road block for equity investments by many.

Lifting this tax will help boost investors' confidence.

Another major expectation from the budget is for the automobile industry. The long pending demand for a vehicle scrappage policy may be considered this time as it has the potential to simultaneously reduce pollution, fossil fuel consumption as well as boost demand for new vehicles, thereby meeting many key objectives.

Lowering of customs duty on import of vehicle parts may also be considered. To promote the use of electric vehicles, some subsidy may also be likely.

Urban infrastructure and real estate are expected to get more funds for development. The Pradhan Manti Gram Sadak, the Pradhan Mantri Awas (Rural) and MGNREGA schemes are also expected to get more funds for development.

With the Covid-19 vaccines being rolled out, we are slowly heading towards normalcy and Budget 2021 will play a crucial role in shaping our country's growth story. Like the economists and financial experts, let’s wait for the budget with high hopes.

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