Finance Minister Nirmala Sitharaman will deliver her fourth Union Budget on Tuesday, at a time when the country's economic recovery faces new hurdles.

With the Indian economy expected to rebound despite the effects of the Covid-19 outbreak, all eyes will be on how the government balances its yearly fiscal plan for the coming year.

The salaried class is anticipating income tax reduction so that they would have more spare cash to spend and combat growing inflation. Meanwhile, business leaders in the country are anticipating Nirmala Sitharaman to make some significant pronouncements that will allow them to refocus their growth strategies.

The following are the top expectations of taxpayers and businesses:

DIRECT TAXES

The 80C deduction, which is available up to Rs 1.5 lakh per year, should be greatly increased in the Union Budget 2022.

To make the optional concessionary tax regime, which took effect in April 2021, more attractive, the government must raise the Rs 15 lakh income barrier for imposing the highest 30% tax rate.

TAXATION OF CRYPTOCURRENCY

Crypto assets, which include a wide range of digital assets such as non-fungible tokens, wrapped asset tokens, and so on, will acquire great traction as Web 3.0 develops. In the Budget 2022, it is projected that a specialised framework for cryptocurrency taxation would be implemented.

ADVERTISEMENT

LONG-TERM CAPITAL GAINS TAX

Investor confidence has been harmed by the long-term capital gains tax (LTCG), which was enacted by the Finance Act of 2018. There is no LTCG tax in major economies. LTCG on the sale of Indian-listed equities shares is expected to be exempted in India as well, boosting investment through the stock market.

DEDUCTIBLE EXPENDITURE

Corporates are expecting that the entire amount, or an appropriate proportion of expenditure incurred for helping the society and employee welfare during Covid-19 will be allowed as deductible expenditure.

Also, the government is expected to reduce the tax rates for companies engaged in R&D activities to 15 per cent or less and allow weighted deduction on in-house R&D expenditure.

INDIRECT TAXES

Rationalisation of Customs duty structure for EV and ancillary components, renewable energy generation devices and related components is likely in the upcoming Union Budget.

In the Budget 2022, the government may look into sector specific concessions for semi-conductor manufacturers with focus on exports.

BUDGET ALLOCATIONS FOR PLI SCHEME

The government may announce budget allocations for the expansion of the PLI scheme for sectors such as leather and laminates.

Additional incentive schemes will also lure companies into setting up additional manufacturing in sectors that were not the focus in previous budgets and help reverse the impact of the pandemic.

REVIEW OF CUSTOMS DUTY

The government is already reviewing 400 customs duty exemptions (as announced in the previous budget). The final list is expected to be proposed as part of the 2022 budget and industry is awaiting it so that there is no adverse impact on trade as a result of this exercise.

EXTENSION OF CUSTOMS CUTY EXEMPTION

Extension of customs duty exemption on goods imported for testing, and setting up of a customs dispute resolution forum, easing compliance with customs, and integration of the current ICEGATE, DGFT and SEZ online portal into a common digital platform are expected in Budget 2022.