Budget 2021: Bring Covid Rebate against Income tax

A rebate in income tax is a direct discount from tax. Suppose your gross tax liability is ₹10,000/- and you have claimed a rebate of say, ₹5000/-, your net tax liability shall be ₹5000/- only. The income tax law has always favored tax rebates for small taxpayers. Currently, the tax-payers having income up to ₹5,00,000/- do enjoy a tax rebate of up to ₹12,500/-. This means you don’t need to pay tax if your income is ₹5,00,000/- or lesser though you are required to file an Income tax return.

The Covid-19 pandemic has forced some changes in our lives and finances. These changes are felt more by the people who got infected with the virus. For such people, in addition to the physical and mental burden of the infection and disease, it was the loss of gainful employment for a period of more than 15 days. This was the case also for the people who had to be mandatorily quarantined for about 15 days. To ease the adaptation to such changes, the Budget will do good by providing incentives to small taxpayers touched directly by the virus.

On this line, the Budget can provide a Covid rebate of ₹10,000/- for those taxpayers who were infected with the virus or were quarantined because of exposure to the virus. The testing for covid and further procedure of home quarantine or hospitalization or preventive quarantine has been linked with Aadhar at every stage, therefore, the chance of misreporting and fraudulent claims are less. The benefit of this rebate may not be extended to all those who were infected but only to those who need that. The individual taxpayers having an income of ₹10 lacs or less may be considered for this special incentive.

The current number of infected people across the country is 1.05 crores and with the current rate of growth, this number may not be more than 1.1 crores at any rate. There is no data in the public domain on the income profiles of infected people. However, since the disease is prominently urban and has affected people across all income strata, we may assume that 20% of the infected people are taxpayers which comes to 22 lakh taxpayers. In the rarest of situation, all these people will be eligible to claim the rebate. Considering this rarest of situation, the upper limit for the revenue loss to the Government shall not exceed Rs. 2,200 crores. This loss of revenue weighs much less in comparison with the trauma faced by infected persons.