Budget 2023: Why is this a good budget for the salaried class, senior citizens and small investors

Union Budget 2023 provides a balanced platform for the Indian economy as it catalyses the adoption of newer technologies like green energy, and promotes digital infrastructure, even as it increases allocation to physical infrastructure.

Savings for salaried class

When it comes to savings, the salaried class was anticipating a rebate and relaxation of some sort in income-tax slabs, which has rightly been taken up in this budget.

Tax exemption limit increased

Earlier, those with an income of up to Rs 5 lakh per annum did not pay any income tax under both the old and new tax regimes from FY 2020-21.

This budget increases the rebate limit to Rs 7 lakh per annum in the new tax regime.

Standard deduction for salaried and pensioners

Earlier, the standard deduction was not part of the new tax regime which was effective from FY 2020-21 but the same is now available from FY 2023-24.  Now, salaried persons with an annual income of Rs 15.5 lakh or more can avail a deduction of Rs 52,500.

Also read: Budget 2023 | Old vs new tax regimes: Who should make the switch?

Simplified tax slabs

Budget 2023 reduces the number of tax slabs to five, making the calculation process easier.

With these proactive steps to reduce income-tax rates, there is an intention to push individuals to opt for the new tax regime. Taxpayers still have the option to choose between the New and Old tax regimes, the new regime will be a default selection and an individual will have to choose the Old tax regime while filing the taxes. The tax payer will have to compare the tax between the two regimes and select the option which is best suited for him. This will depend on the number of exemptions taken by them during the financial year. The popular exemptions available in the Old tax regime are savings under 80(C), health insurance under 80(D) and savings under NPS.

This will reduce forced savings by individuals under Section 80(C), NPS and health insurance under Section 80D in the old tax regime, thus putting the onus of savings in the hands of the individuals, with no coercion from the government’s side.

This goes with the intention of the government to remove exemptions to income tax in the long run.

Small savings scheme for women

The finance minister announced a new scheme, exclusively for women -- the Mahila Samman Savings Certificate. This scheme offers an interest rate of 7.5 percent for a maximum deposit of Rs 2 lakh for two years.

Increased deposit limit for Senior Citizen Savings Scheme

The minister has also proposed to double the deposit limit for the Senior Citizen Savings Scheme to Rs 30 lakh for individuals and to Rs 60 lakh in case of joint accounts.

Enhanced deposit limit for Monthly Income Scheme

The maximum deposit limit for the Monthly Income Account Scheme has been increased to Rs 9 lakh from Rs 4.5 lakh for an individual account and to Rs 15 lakh from Rs 9 lakh for a joint account.

Also read | Budget 2023: Govt removes tax exemption in traditional insurance policies with premium over Rs 5 lakh

Income from insurance with premium more than Rs 5 lakh to be taxed

Individuals who pay a premium of more than Rs 5 lakh for a savings life policy will have their incomes from the policy taxed upon maturity. This threshold of Rs 5 lakh applies only to the first-year premium and not to the sum of the first year and renewal premiums.

Till now, income from life policy was tax-free under Section 10(10)D, irrespective of the premium amount.

Given the strained finances and a tough international outlook, the finance minister has to be commended in delivering a budget which is clearly in the best long term interest of the nation.