From a common man’s lens, this Budget is all about the new tax regime which has been made attractive for the common man as well as for the ultrarich. This will now be the default option not just by design but also by choice.
Individuals earning up to Rs 7 lakh (Rs 7.5 lakh for salaried) with standard deduction will have to pay zero taxes, a saving of Rs 39,000. Also, for those with taxable income above Rs 5 crore, the new tax regime would be highly beneficial with the reduced surcharge, since the maximum marginal rate for this category is proposed to be reduced to 39% under the new tax regime as against the current 42.74%.
Potential Impact on Savings
With the new tax regime becoming more attractive, the need to invest in tax-saving products to avail tax benefits is dispensed with. In an environment where tax benefits determine the investment decisions, this could directly impact overall investments and savings. While reduction in investments could be detrimental to individuals in the long run, this could also impact the overall savings which contribute significantly to the capital and infrastructure spending of the government.
Also Read: Old vs New Tax Regime: How will Budget 2023 benefit taxpayers under both regimes?
It is heartening to see that the government seems to have proactively addressed this by doubling the investment limits for specified savings schemes and introducing a new instrument targeted at women. There is no tax benefit provided for these savings schemes, clearly delinking savings from tax and yet making savings attractive for specific target groups.
For instance, most pensioners benefiting from the new tax regime, would not require investments to save on taxes. However, they would certainly seek to leverage the enhanced limits for specified savings scheme as detailed below, to park their excess funds.
Similarly, women and girls could leverage the Mahila Samman Savings Certificate to park their liquid funds. Also, Sukanya Samriddhi Yojana would continue to attract investment subject to maximum of Rs 1.5 lakh per annum for the girl child.
Overall, the government seems to have maintained balance between tax and savings for individuals and its capital needs.
(By Saraswathi Kasturirangan, Partner, Deloitte India, and Anandan N, Manager, Deloitte Haskins & Sells LLP)