Rebate in income tax is a direct discount from tax. Suppose if your gross tax liability is Rs. 10,000/- and you have claimed a rebate of say, Rs.5000/-, your net tax liability shall be Rs.5000/- only. The income tax law has always favoured tax rebate for small taxpayers. Currently, the tax-payers having income up to Rs.5,00,000/- do enjoy tax rebate of up to Rs. 12,500/-. This means you don’t need to pay tax if your income is Rs.5,00,000/- or lesser though you are required to file 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 thephysical 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 bemandatorily quarantined for about 15 days. To ease the adaptation to such changes, the Budget will do good by providing for incentives to small taxpayers touched directly by the virus.
On this line, the Budget can provide a Covid rebate of Rs.10,000/- for those taxpayers who were infected with virus or were quarantined because of exposure to the virus. The testing for covid and further procedure of home quarantine or hospitalisation or preventive quarantine has been linked with Aadhar at every stage, therefore, the chance of mis-reporting 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 income of Rs.10 lacs or less may be considered for this special incentive.
The current number of infected people across country are 1.05 crores and with current rate of growth, this number may not be more than 1.1 crores at any rate. There is no data in public domain on 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 the infected persons.