Higher standard deduction, easier tax slabs among salaried class expectations from Union Budget 2023 | The Financial Express

Higher standard deduction, easier tax slabs among salaried class expectations from Union Budget 2023

Budget 2023 Expectations: From a tax-free slab of Rs 5 lakh to a higher exemption limit under Section 80C, herw is is what salaried individuals are hoping for in upcoming Budget.

Budget 2023, Budget Expectation, income tax slabs
Salaried class is hoping for the government to consider further increasing the standard deduction amount in order to provide more relief to salaried taxpayers, who, on average, pay three times more tax than business or professional taxpayers.

Finance Minister Nirmala Sitharaman is all set to present Budget 2023 on 1 February, and the salaried class is looking forward to some major announcements on the increase in income tax deductions and slab rates. Earlier, Finance Minister Nirmala Sitharaman said that there will be no new taxes levied on the middle class and that the forthcoming budget will be middle-class friendly. While this is a positive announcement for salaried individuals, the middle class is expecting some other favourable announcements like new tax slabs with lower rates and increased tax rebate on home loans.

What salaried people expect from Finance Minister in Budget 2023

  • Increase in the basic exemption limit and standard deduction to reduce the overall tax burden.
  • Increase in the limit of tax-saving investments under Section 80C of the Income Tax Act.
  • Introduction of new tax slabs with lower tax rates.
  • Increase in the limit of gratuity and provident fund.
  • Measures to improve the overall affordability of housing for salaried individuals, such as increasing the tax benefits for home loans.
  • Measures to support the overall growth of the economy and creation of new jobs, which will ultimately benefit salaried people.
  • Measures to increase social security benefits for salaried individuals.

Revision in tax slabs: At present, 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 expect the government to raise the basic tax exemption from Rs 2.5 lakh to at least Rs 5 lakh.

Non-taxable limit on equity LTCG: Long-term capital gains (LTCG) from the sale of listed equity shares and units of equity-oriented mutual funds are taxable, if the gain exceeds Rs 1 lakh per annum. This category of long-term assets had enjoyed total tax exemption since 2004, since these transactions were subject to Securities Transaction Tax (STT). However, Budget 2018 introduced tax on LTCG above Rs 1 lakh. While the withdrawal of STT appears unlikely, salaried class people who are retail investors expect the non-taxable limit of Rs 1 lakh per year to be increased to at least Rs 2 lakh.

HRA deduction privilege: Salaried employees expect 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, fall 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 employs around 15 lakh people in the IT/IT-enabled sector, has also increased. Thereby, salaried individuals in such cities are also expecting HRA deduction privileges.

Tax exemption for home buyers: Salaried home buyers are also seeking additional incentives like increased rebate on home loans. 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 govt will increase this limit to up to Rs 5 lakh. Additionally, homebuyers can claim a deduction of up to Rs 1.5 lakhs under Section 80C for the principal amount paid on a housing loan. In the upcoming Budget, they expect this limit to be increased to Rs 3 lakh.

Exemption on personal loans: At present, education loan and personal loan comprise 35% of the country’s total 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. From this year’s Union Budget, salaried employees availing personal loans will also be expecting some relaxations.

Some other major expectations of the salaried employees from the Union Budget 2023 include long-term benefits in healthcare, superannuation, maternity, and post-retirement benefits.

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First published on: 23-01-2023 at 14:29 IST