The government is set to announce Union Budget 2023 on February 1, 2023, and taxpayers are curious to know what it has in store for them.
Experts say the aim of this Budget should be towards widening the tax base to grow the tax revenues of the government along with providing adequate relief to the taxpayers.
According to the income tax department, around 50 per cent of the income tax returns (ITR) filed in 2022 were ITR-1, i.e., filed by salaried individuals, which accounts for a large group of taxpayers.
Salaried individuals expect major tax reliefs, since they have been grappling with the multiple impacts of layoffs, pay cuts, and rising inflation.
Here are some of the major changes expected from Union Budget 2023.
Tax Slabs
The current tax slab with a basic exemption limit of Rs 2.5 lakh is anticipated to be increased to Rs 5 lakh under both the old as well as the new tax regimes. This will have a flow-on effect on higher-income individuals as well.
The exemption limit of Rs 2.5 lakh has not been changed since 2014-15. Experts say this must be reviewed, considering factors such as inflation. The new tax regime wasn’t received well by the taxpayers. The government may now simplify the tax system by merging both the regimes.
Says Ramit Mahajan, a Mumbai-based supply-chain professional: "I am hoping the income tax slabs get simplified – it’s not easy to navigate through our tax returns, and simplification will greatly help us. Also, simplification of the capital gains tax structure will be very welcome."
Higher Standard Deduction
The government may increase the standard deduction limit from Rs 50,000 to Rs 1 lakh in Budget 2023.
Enhanced 80C And 80D Limit
Experts say the deduction limits under sections 80C and 80D of the Income-tax Act, 1961 should be increased to incentivise more people to invest in government schemes, such as the National Savings Certificate (NSC) and Public Provident Fund (PPF), among others.
“We can see an increase in the Section 80C deduction limit from its current threshold of Rs 1.5 lakh to Rs 2.5 lakh after nearly a decade. This will incentivise people to invest in government-related schemes such as NSC, PPF, etc, giving thrust to the infrastructural development in the country," says Archit Gupta, founder and CEO, Clear, a tax portal.
"Likewise, the government may also consider increasing the deduction limits under Section 80D from Rs 25,000 to Rs 50,000, and Rs. 50,000 to Rs 1 lakh for the respective categories, given the exorbitant medical expenses and hospitalisation costs,” he adds.
Slash Surcharge Rate
The surcharge rate of 37 per cent brings the tax to 42.74 per cent for people earning more than Rs 5 crore. According to experts, this should be revisited, as the surcharge for those with income above Rs 10 crore and above is also 37 per cent.
Enhancement Of Other Deductions
This is the last year for claiming deductions like 80EEA (interest on housing loan), and 80EEB (electric vehicle loan). There could be a two-year extension on these deductions.
Mahajan adds, "The post-COVID hybrid culture should also be encouraged through appropriate tax relief and incentives for items, such as office furniture, Internet connections, and laptops."
Revisiting Children's Education And Hostel Allowance
The Child Education and Hostel Allowance have remained static at Rs 100 and Rs 300 per child per month, respectively for over 20 years now.
Gupta says the government must consider raising the limits to Rs 1,000 and Rs 3,000 per child per month, respectively.
