New Delhi: From the common taxpayer to big industries, every one has their eyes set on February 1, when Union Finance Minister Nirmala Sitharaman will present the Budget on February 1. Amid rising inflation and high-interest rates, taxpayers are expecting a host of relief measures from the Budget this time.
Some of the items on the taxpayer’s wishlist from this year’s Budget include an increase in basic income tax exemption limit, higher deduction limit in section 80C, sops for homebuyers, a separate deduction section for life insurance.
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The Union Budget 2023-24 will be the government’s final full budget before the 2024 Lok Sabha election and PHD Chamber of Commerce and Industry expects it to be one that helps maintain the steady economic growth trajectory. ASSOCHAM Secretary General Deepak Sood is also of the view that boosting consumption by leaving more money in the hands of the consumers, is a low hanging fruit for a further recovery in economic growth.
While taxpayers are keeping their hopes high, experts do not expect any big changes in income tax regime or structure this year. “We do not expect larger-than-life sops and subsidies being announced but a well-calibrated sectoral allocation instead,” Economic Times quoted Anand Dalmia, Co-founder & CBO of Fisdom, as saying.
Here’s a look at some of the changes that taxpayers are expecting to be announced in this Budget:
Hike in 80C exemption
From the Budget 2023, taxpayers want the tax deduction limit doubled under 80C. A majority of investors want FM Sitharaman to update the tax deduction limit according to a fresh survey by financial planning startup Kuvera. At present, salaried employees can under Section 80C reduce their taxable income by Rs 1.5 lakh in a fiscal year.
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The recent poll has highlighted that over 2 out of 3 respondents wished for a raise to the tax deduction limits under section 80C of the Income Tax Act.
In another pre-Budget 2023 survey by Deloitte, the majority of 181 respondents across 10 industries said they were expecting “changes in personal taxation in the form of more tax exemptions and increasing deduction limits such as the interest deduction for house loans, to be most effective for individuals, which would give them more purchasing power and thereby increase demand (consumer) in the market.”
Income tax rates
A pre-budget 2023 ET online poll of over 5,600 readers received varied responses on a range of issues like taxation, inflation, government finances, electric vehicles (EV) and China. The poll indicated that almost half the people surveyed (48.7 per cent) said an “effective” cut in personal income tax rates is the one move that can make Union Budget 2023 a super-hit.
Currently, a 5 per cent tax is levied on total income between Rs 2.5 lakh and Rs 5 lakh, 10 per cent on Rs 5 lakh to Rs 7.5 lakh, 15 per cent on Rs 7.5 lakh to Rs 10 lakh, 20 per cent on Rs 10 lakh to Rs 12.5 lakh, 25 per cent on Rs 12.5 lakh to Rs 15 lakh, and 30 per cent on above Rs 15 lakh.
Capital Gains Tax
The upcoming Budget could simplify capital gains tax, according to reports. The government is considering changes to bring parity in rates and rules between public and private markets. Shalini Jain, Tax Partner, People Advisory Services, EY India told ET that the Centre may consider reducing the holding period of all equity shares and mutual fund units (whether listed or unlisted/ equity or non-equity) for qualification as long-term capital asset to 12 months.
Further, applicable tax rate on profit/gains from sale of such long-term capital assets may be unified to 10 per cent without giving the benefit of indexation, Jain added.
Increase in standard deduction
The standard deduction is a cut taken from gross salary income of employees and pensioners to bring down the individual’s taxable salary income, lowering their tax burden as well. As of now, all salaried employees are entitled to a Rs 50,000 deduction. Taxpayers are seeking an increase in the limit.
Pension income be made tax-free
Taxpayers, including both retirees and those planning their retirement, have been making this demand since long but the Centre hasn’t yet made the pension income tax-free. Even the life insurance companies and the Pension Funds Regulatory and Development Authority (PFRDA) voiced their support for this.
Currently, annuity or pension income of retirees generated through their retirement corpus accumulated over the years, is taxable.
Other expectations from Budget 2023
Another key expectation of taxpayers, according to the Kuvera survey, is making the scheme for switching from regular to direct of the same fund tax free. Currently the scheme is taxable. 3 out of 10 responders voted for this change.
