Price hike in oil prices: why and how

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The fuel Price in India hit the record high three figures for the first time in the history of India. On Wednesday the retail price of regular petrol hiked by 26 paise in Rajasthan’s Sri Ganganagar and reached Rs. 100.13. While the Diesel rested at Rs. 92.13 after a hike of 27 paise. The fuel prices in India vary from state to state, City to City. It is determined after implementing state and central government taxes. So why are the prices rising like never before?  After effects of the infamous Pandemic:  Due to the then on-going Pandemic, the demand of Crude Oil (pre refined petroleum) showed a significant drop in April 2020. Which then turned to a collapse in prices of crude oil.           After Pandemic, Saudi Arabia a key oil producing country voluntarily cut its supply by about one million barrels to 8.125 million barrels of crude oil to boost the prices hence to cover the loss due to Pandemic. Resulting in Price of Crude Oil hiked by about 50%. Compared to $40/Barrel

What's in it for middle class

As India looks to recover from the disastrous Covid-19 blow, the common man who is still reeling under the effects of the pandemic is awaiting some relief from the upcoming union budget. The union budget will be presented by the country's Finance Minister Nirmala Sitharaman on February 1st, 2021.  Here are some expectations by a common man from the Budget 2021.




Standard deduction for work from home:

 Coronavirus had made more people work from home than ever before. Big or small, all offices are empty while homes which used to be a source of peace and calm have become chaotic and stressful. With no end in sight for the pandemic, India’s salaried class is braving difficult times keeping up with working from home. Coronavirus had made more people work from home than ever before. Big or small, all offices are empty while homes which is used to be a source of peace and clam have became chaotic and stressful. With no end in sight for the pandemic. India's salaried class is braving difficult times keeping up with working from home.

Realignment of tax rates:

 For individual taxpayers below 60 years of age the income tax exemption limit is Rs 2.5 lakh per annum. This limit has remained unchanged from Financial Year 2014-15. Hence to enhance the net disposable income, the exemption limit under the existing tax regime is expected to increase to Rs 5 lakh per annum.

 Last year the Budget 2020 provided some relief to taxpayers by allowing them to choose between the existing tax regime and an alternative optional new tax regime. Needless to state that for taxpayers to take advantage of the new tax regime a host of exemptions/ deductions were to be foregone.

 “While the new tax regime had lower tax rates the ultimate benefit to taxpayer was basis the deductions/ exemptions otherwise he/ she was eligible to,” said Parizad Sirwalla, Partner and Head, Global Mobility Services-Tax, KPMG Assurance and Consulting LLP India in his report.

 Enhanced limits to catch up increasing medical costs

There is an increasing trend of health consciousness, be it mindful eating, health check-ups, and preventive treatments, which is eminent in the ongoing pandemic situation and the aftereffects it carries. An enhanced deduction from the present limit of Rs 5,000 for health check-up, deductions for expenditure on medical tests and treatment is hence a valid and genuine ask of the common man.

 Weighted deduction of expenditure

  To boost consumption, a cash voucher scheme was introduced in lieu of leave travel concession (in view of the disruptions in travel and hospitality sectors). “However, the deduction is considered if the employee spends three times the prescribed amount. The government may consider providing a deduction for two times the expenditure incurred for specific purposes to make the scheme more attractive to individuals.

 Enhanced deduction for income from house property

 On account of the pandemic, there is diminished demand for real estate and reduction in rent income. Further, a house owner with house property income would also be incurring higher maintenance, in excess of the 30% standard deduction allowed. In order to support the property owners in these difficult times, the standard deduction may be increased appropriately at least for the next two years.

 Rate cuts

 The Budget 2020 introduced a simplified tax regime with decreased slab rates, but came with conditions. “Individuals would have to forego exemptions and deductions to enjoy this benefit. In order to extend the benefit of lower tax rates to a larger section of individuals, to improve the cash flow issues, the government may consider allowing some of the exemptions and deductions under the new tax regime.

 Relaxation in residential status norms

The scope of income taxable in India is based on the residential status which is determined based on the number of days of stay in India. “Due to restrictions on international air travel, an individual may have been stranded in India and it would be unfair if that stay is also considered to determine their residential status for financial 2020-21, or even beyond if such travel restrictions continue. While a circular was issued to ignore such days in determining residential status for financial 2019-20, a clarification is waited for 2020-21. As this wasn’t foreseen before, the legislation may be amended to ignore those days of stay in India on account of travel restrictions.

  

 Despite the numerous reliefs that have been provided during the year on account of the pandemic, most of these do not directly benefit the common man. The common man is hence looking forward to this year’s Budget to improve cash flows and enable more consumption and savings for better sentiment.

 - रचित


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