FM Nirmala Sitharaman should consider taking a look at certain income tax exemption, deduction limits
Will the Budget 2023 be kinder? Hit hard by red-hot inflation, an uncertain job scenario and higher EMIs, the last few budgets have left the salaried class disappointed on the income-tax front.
Its now hoping that when finance minister Nirmala Sitharaman presents the Union Budget 2023-24, there will be some relief.
Experts, too, want the finance minister to announce some tax relief in the last full budget of the Modi government ahead of the 2024 Lok Sabha election to leave more disposable income in the hands of the taxpayers, which will boost spending that will give the much-needed fillip to the economy.
Budget 2023: Raise standard deduction limit
Under the old tax regime, which is used by the majority of taxpayers, a deduction of Rs 50,000 is provided to all salaried employees. Experts say the deduction limit, which has remained unchanged in the last few years, should be raised to factor in the rising cost of living.
"Given the rising inflation, the taxpayers are certainly expecting some relief there," said Aarti Raote, Partner, Deloitte India.
The government should extend this benefit under both old and new tax schemes, say experts.
Budget 2023: Increase 80c exemption
Salaried individuals avail exemptions under Section 80C to bring their taxable income down by Rs 1.5 lakh in a financial year.
The Institute of Chartered Accountants of India (ICAI), in a note, said that the Budget 2023 should raise the exemption limit to Rs 2.5 lakh.
Experts say that an increase in deductions and exemptions help drive retirement savings.
"These tools are crucial to extending the social security net to a large, ageing population and can do with additional limits,” said Ashish Misra, Chief Operating Officer (COO), Retail Banking, Fincare SFB.
80C exemptions can be availed against these investment options: Public Provident Fund (PPF), National Saving Certificate (NSC), 5-year term deposit with banks, Life Insurance Corporation (LIC) premiums, Employers Provident Fund (EPF), Equity Linked Savings Scheme (ELS),and Unit Linked Insurance Premiums(ULIP).
Budget 2023-24: Tax slab rejig
The lowest personal income tax slab is at 5 percent and the highest goes up to 42.74 percent, inclusive of surcharge and cess.
The tax rate of 42.74 percent is among the highest in the world. The maximum personal I-T rate in Hong Kong is 15 percent, Sri Lanka 18 percent, Bangladesh 25 percent and Singapore 22 percent.
Income tax slabs have remained unchanged since the Budget 2016-17 except for the introduction of a concessional income tax regime a few years ago.
Under the current regime, the highest tax slab is 30 percent for an individual with an income exceeding Rs 10 lakh.
Experts agree that a hike in the basic exemption limit from Rs 2.5 lakh to Rs 5 lakh is needed along with a reduction in income-tax rates. They want the Budget 2023 to lower the highest slab rate to 25 percent.
The threshold for the highest slab rate should be doubled from Rs 10 lakh to Rs 20 lakh, they added.
Is the FM tuned in to these demands? We will know on February 1.
Checkout Budget Highlights 2023
