The 2021 Budget: What the common man needs

The budget is due like clockwork on the 1st of Feb 2021 and will be the first ‘paperless’ budget. The past year has been eventful, to say the least. While the government has offered stimulus packages to offer relief, the common man is yet to feel its effects.

Will the 2021 budget take into consideration the common man’s needs?

Here are some key pointers that the common man looks forward to in the budget, in hope of relief from the complications the current pandemic has brought with it.


With the disruption in business, income, and markets investors are struggling to maintain their investment portfolios. The wait until vaccinations are delivered to every household could be long drawn out, and would continue to affect businesses and incomes in the process. A relief in the form of raising the slab limit of 80C which offers deduction on payments towards home loan principals, PF, insurances, etc. Currently, the upper limit is at Rs.1.5 lakhs, increasing it could encourage investors to invest more having a two-fold effect of reducing their tax burden and steadily building up their investments and portfolios.


Medical inflation in India is on a staggering 12% to 15% rise year on year. This translates into rising costs of treatments and basic healthcare necessities. The current pandemic has highlighted the need for mandatory health and term insurance too, to safeguard families from expenses arising out of hospitalization, accidents, or illnesses. A mere Rs. 5,000 which is the current limit for Preventive health check-up (Medical check-up) expenses which is included in the Health Insurance Tax deduction under section 80 D of the Income Tax Act needs to be revisited. The upper cap limit on health insurance premiums under this section too should be raised to encourage people to invest in insurance.

Real estate:

The real estate sector is seeing a turnaround with investors flocking towards physical assets for its stability in returns post the 2020 crisis. The home loan incentive offered to investors on the previous budget had given it an additional boost. The 2020 budget further offered an extension to the home loan incentive till 31st March 2021. This incentive under section 80 EEA offered first-time homebuyers an additional benefit of Rs. 1.5 Lakhs on home loan interest payments; this was over and above the 80C benefit and applies to properties valued up to Rs. 45 lakhs. A further extension of this incentive would give rise to opportunities for real estate investments and add to the liquidity and growth of the real estate sector.


The lack of business continuity and profitability has converted to job losses in the current year. The lack of an emergency fund or adequate savings may force investors to dip into their provident funds, bonds, or deposits. The combination of job loss and withdrawal or pre-closure of long-term funds like bonds or deposits attract heavy taxation. Take for instance PFs, where a break in service period of 5 years attracts taxation in case of withdrawals. A clause for relaxation in taxation on closure or withdrawals of long-term investments would be well received. Similarly, equity gains exceeding Rs. 1 lakh in a financial year attract 10% LTCG. Relaxation on the PF withdrawal terms for job loss norm and the rate of LTCG taxation could be a boon and further encourage investors to invest in equities.


The restrictions in travel, due to the pandemic, stranded travellers both in India and across the globe for a prolonged period. Officially this affects their residential status which is calculated based on the number of days they stay in India in 2020-21. While there have been circulars stating these days during travel restrictions will be ignored, the same is yet to be confirmed in the current budget.

Standard deduction for work from home:

Work from home is the new normal these days and the salaried class has to incur additional expenditure to meet communication and infrastructure requirements. The introduction of a standard deduction for such expenditure will be a welcome relief for the salaried class.

Weighted deduction of expenditure:

To boost consumption ‘Cash’ should be injected into the economy. This can be done through introducing new schemes on cash transfers, incentives for consumption, such as the LTC scheme, as well as vouchers, or the existing schemes can be loosened up. For example, a cash voucher scheme was introduced in lieu of travel concession however a private sector employee can avail of the LTC cash voucher scheme if he/she spends three times the amount of deemed LTC fare on the purchase of goods/services, having a GST rate of 12% or more. The government should consider providing a deduction for two times the expenditure incurred to make the scheme more attractive for individuals.

New Tax regime:

In the budget 2020, the new tax regime didn’t only introduce a simplified tax regime with decreased slab rates but came with conditions that individuals would have to forgo exemptions and deductions to enjoy this benefit. In order to extend the lower tax rate to a larger section of society, the government should allow some of the deductions and exemptions under the new tax regime.