Budget 2023 | Salaried professionals expect more options for safe investments, tax reduction

There is an expectation that the budget will give the salaried class more options for safe investments and tax reduction.

With layoffs becoming the trend in 2023, salaried professionals have high hopes for the Union Budget 2023-24. From changes in certain sections of income taxes to clarity on labour laws, the list goes on.

Multiple experts and staffing firms have urged the government to tweak Section 80JJAA of the Income Tax Act of 1961. The section enables companies to claim deductions for the recruitment of new or additional employees.

“Since 2014, the implementation wage has been capped at Rs 25,000 per month, but it is necessary to revise this figure to account for inflation over the past eight years. An increase to Rs 50,000 would be ideal to provide quality jobs and the benefits of economic prosperity to all,” said Lohit Bhatia, President of Workforce Management at staffing major Quess Corp.

“Boosting funding through Startup India programmes can help startups tide over the downturn. A suggestion would be to match Angel and VC funding, which will go a long way in elevating the startup economy,” said Sudhakar Raja, Founder and CEO at TRST Score, an HR Tech startup.

Funding for Indian startups dropped by 33 per cent to $24 billion in 2022 as compared to the previous year, though it was nearly double the amount recorded in 2019 or 2020, according to a PwC India report.

Raising the minimum tax bracket

The common expectation among salaried workers is an increase in the minimum tax floor from 2.5 lakh to 5 lakh.

“The highest tax rate for the same group is also at 30 percent, which is widely expected to be reduced to 25 percent,” said Sachin Alug, CEO of talent solutions firm NLB Services.

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When it comes to corporations, he added that businesses and leaders across industries have shown their inclination for a 15 percent corporate tax rate over the current 22 percent.

Per current income tax regulations, the rate for the highest income slab, surpassing Rs 5 crore, is 42.74 percent after surcharge and cess. “This is a lot higher than several Asia-Pacific nations,” said Anshuman Das, CEO and co-founder at talent solutions provider Careernet.

Therefore, he said it is anticipated that the maximum tax rate of 30 percent will be cut to 25 percent, giving people greater purchasing power and offering tax relief. “The highest slab rate (including surcharge and cess) may be lowered as a result from 42.74 percent to 35.62 percent,” he added.

More options for safe investments and tax reduction

There is an expectation that the budget will give the salaried class more options for safe investments and tax reduction. Although Mahesh Krishnamoorthy, MD of compliance management firm Core Integra, is not in favour of raising tax exemption thresholds, he said giving salaried people more options to invest will benefit both them and the government.

“As an illustration, raise the 80C exemption limit to Rs 15 lakh and provide 3- to 7-year investment options on cumulative interest, with the investment amount being exempt in the year of investment and the interest being exempt in the year of maturity,” he said.

According to Krishnamoorthy, there should be no cap on the amount of interest paid for the benefit offered on housing loan interest (currently Rs 2 lakh). “This will encourage home ownership as an investment choice for those with higher incomes and increase demand for mortgage loans, ” he said.

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Under Section 80D of the Income Tax Act, 1961, for a person aged below 60 years, the limit for deduction for medical expense allowance is up to Rs 25,000. But after the onset of the pandemic, experts say medical expenses and premium amounts have shot up.

“The government should look into this and increase the limit from Rs 25,000 to Rs 50,000,” said RP Yadav, CMD of Genius Consultants.

The same goes for senior citizens, who have been more prone to various ailments after the pandemic hit. “It is expected that their limit should be increased from the current Rs 50,000 to at least Rs 1,00,000,” he added.

Child care expenses

With the rising cost of education, the HR leader said childcare expenses should be tax deductible up to a certain limit and employees who have contributed to provident funds (they have a longer duration) could be considered for healthcare coverage.

“The significance of child-care and education cannot be overemphasised and this expense deserves to qualify for a separate deduction or an increased limit just like health insurance and other expenses,” said Swadesh Behera, Chief People Officer at Titan Company.

The current Child Education Allowance given by the government is Rs 100 for the first child and Rs 300 for the second child. “The current cost of education is very high due to the shortage of government schools, which leads most parents to put their children into private schools,” observed Yadav.

Therefore, he said, it is hoped that the government will increase the benefit to Rs 500 for the first child and Rs 1,000 for the second child.

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Clarity on labour laws

Given that India holds the Presidency of the G20 this year, the industry said the government should concentrate on implementing the four labour laws and streamlining and easing the country’s overall labour and compliance requirements.

“The easier codes can be implemented first while simultaneously deliberating and interacting with all stakeholders on the others. We should not let go of this crucial year for implementation,” said Quess Corp’s Bhatia.

Even though the general outline of new laws was announced a few years ago, Core Integra’s Krishnamoorthy said there are still a lot of “ifs” and “buts” that need to be resolved.

“It would also be beneficial if the new regulations were centrally defined with clarity for everyone to understand,” he said.

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