Salaried employees are the largest group of taxpayers in the country; thereby, being the highest contributors to the overall economy. According to the 2022 data on the total income tax returns, 50 per cent of the tax returns were filed through ITR 1 by salaried individuals. Ahead of the declaration of the Union Budget 2023 by the Finance Minister on 1 February, salaried employees are expecting some major announcements on the increase in tax deductions and slab rates.
The primary reason why salaried employees are expecting a major tax relief is that despite the cost of living and investment or insurance premium being high, tax saving is still the same since 2014. This has brought forward a major opportunity for the government to introduce some long pending revisions in the Income Tax Rules to facilitate ease of living for salaried employees.
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Here are some of the key expectations of the salaried employees from the Union Budget 2023:
Revision in tax slabs
Presently, taxpayers can choose between two tax regimes while filing taxes, through which their income is exempt from tax up to Rs 2.5 lakh and there is no tax applicable for up to the income of Rs 5 lakh. The salaried employees, who are the major taxpayers, are expecting that in this year’s Union Budget, the government will raise the basic tax exemption from Rs 2.5 lakh to at least Rs 5 lakh.
Updated HRA Rules
The salaried employees anticipate that there needs to be a revision in the definition of metro cities for the calculation of the House Rent Allowance (HRA). Presently only four cities – Delhi, Kolkata, Chennai and Mumbai, falls under the category of metro cities and employees in these cities are benefited through HRA deduction. However, the cost of living in other cities like Bengaluru, which is considered the Silicon Valley of India and employs around 1.5 million people in the IT/IT-enabled sector, has also increased; thereby should get an HRA deduction privilege.
Tax exemption for home buyers
To increase affordable housing, from the Union Budget 2023, salaried home buyers are expecting the government to provide additional incentives. Currently, Section 24b of the Income Tax Act allows home buyers to claim a tax deduction of up to Rs 2 lakh on the annual interest paid on housing loans. Taxpayers are expecting that in this year’s budget, the government will increase the limit to up to Rs 5 lakh. Also, home buyers can claim a deduction of up to Rs 1.5 lakhs under Section 80C for the principal amount paid on a housing loan and are expecting the limit to be increased to Rs 3 lakh.
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Exemption on Personal Loan
While the education loan and personal loan comprise 35 per cent of the country’s lending market, Section 80E of the Income Tax Act provides an exemption limit on the interest on only education loans and there is no exemption provided for personal loan borrowers. This year, the salaried employees availing personal loans will also be expecting some relaxations.
In a nutshell, the major expectations of the salaried employees from the Union Budget 2023 are long-term benefits in healthcare, superannuation, maternity, post-retirement benefits, relaxations in the taxes, additional incentives while availing loans and a rise in the standard deduction limit.
