Union Budget 2023-24: Finance Minsiter Nirmala Sitharam will present the Union Budget 2023-24 on 1st February 2023, and this year, the expectations are quite high as this will be the present government’s last full budget before the general elections of 2024. While there could be major announcements for the Infrastructure and Education sector, people also have high expectations regarding the increase in Section 80C exemption, income tax relief, and standard deduction hike among others.
What to expect from Budget 2023?
The Union Budget 2023 is expected to announce some changes to the current tax slabs, and this is one of the major changes that taxpayers are looking forward to. It has been quite some time since the tax slab rates were revamped. There is an expectation from the general public that the basic tax exemption limit will be raised from Rs 2.5 lakh to at least Rs 5 lakh or more in the upcoming budget.
Even for salaried people and pensioners, the standard deduction limit has been steady for a few years, and given that the cost of living has increased, the deduction limit should also be increased. The standard deduction is the money that is deducted from gross salary income. This lessens the individual’s tax burden by lowering the individual’s taxable salary income.
Those who are planning to buy a home or have an ongoing home loan can look forward to announcements regarding lowering interest rates on home loans. However, if interest rates are increased, taking home loans will become a major challenge for many. Therefore it will be interesting to see if the government will factor in the affordability concern. Tax exemptions or deduction announcements, especially for first-time home buyers, will be a major focus.
Pre-budget proposals from the MSME industry have also suggested that the government in the upcoming budget should lower the cost of doing business, including the costs of capital, power, logistics, land and labor. It was also suggested that for businesses, hassle-free disbursements of loans at affordable rates of interest is equally important. Factoring in the financial difficulties faced by the MSME sector, PHDCCI had earlier said that the current banking norms result in high primary security and collateral demanded by banks for the MSMEs.
Income tax benefits expected from Budget 2023
The deduction availed by individuals on the interest paid on home loans is capped at Rs 2 lakh. The budget this year is expected to increase this deduction limit as the property rates have also gone high. This could benefit people with home loans or first-time home buyers who are looking forward to taking home loans. The Indian taxpayer is also expecting the government to hike the standard deduction amount from Rs 50,000 to Rs 1 lakh.
Speaking of loans, exemption on personal loans is another concern. Currently, there are no special incentives and exemptions for personal loan borrowers. If the Finance Ministry in the upcoming budget announces some form of relief on those lines, it would without a doubt be tremendously beneficial for personal loan borrowers.
The taxpayers are also hoping for the basic tax exemption limit to be raised from Rs 2.5 lakh to at least Rs 5 lakh or more in the Union budget. Presently, income up to Rs 2.5 lakh is non-taxable in both old and new tax regimes, and there is an additional exemption of Rs 12,500 provided under Section 87A of the Income Tax Act for income up to Rs 5 lakh.
Budget 2023 expectations for the stock market
The Indian share market has seen turbulent times considering the inflationary pressure, ongoing war, and monetary tightening at a record pace. The market really needs a boost from the upcoming budget which will be presented by Finance Minister Nirmala Sitharaman on February 1, 2023.
First and foremost, market experts are really hoping for LTCG tax removal. LTCG is the Long-Term Capital Gains tax. As of now, the long-term capital gains over Rs 1 lakh on listed equity shares is taxable at the rate of 10% without the indexation benefit, this is if the holding period is more than 12 months. The government this year is expected to increase this limit which will result in a rise in disposable income by investors.
Market experts have observed that there has been a trend where the share market underperforms before the budget. This especially happens because the market gets highly volatile in anticipation of the upcoming budget. Although it is difficult to predict how the market would perform post the budget announcement, volatility still remains high on the budget day and this has been the trend for the past few years. If the government hikes LTCG tax on equities, it could put a dampener on the stocks, especially for the broader market.