Income Tax slab revision to higher standard deduction: What resident individuals expect from Budget 2023 | The Financial Express

Income Tax slab revision to higher standard deduction: What resident individuals expect from Budget 2023

Budget 2023 Income Tax expectations: There is high hope that something big with regard to tax benefits will be coming in the upcoming union budget.

Top Budget 2023 expectations of taxpayers
Top Budget 2023 expectations of taxpayers. Representational image

By CA Ruchika Bhagat

The New Year has just started so, many of our plans depend on how our economy is moving, and our Union Budget is a reflection of that only. As usual, from the industry stakeholders to the salaried class, everyone will be looking at the FM, Smt. Nirmala Sitharaman with high hopes.

The last year’s budget to some extent proved to be fulfilling the expectation of the common person by the Government committed heavily to food security and public welfare during the time the pandemic. There is high hope that something big with regard to tax benefits will be coming in the upcoming union budget.

Also Read: Budget 2023 Income Tax Changes Live Updates

Prediction says that this year, the budget can bring changes in the current income tax slabs as well. There are four slabs set by the government under the Income Tax Act. These tax slabs depend on factors such as age, income levels, tax residency status of the taxpayer, etc.

Also Read: Budget Expectations Latest Updates on Jan 31

In the upcoming budget for 2023–24, the Union government is likely to enhance the income tax exemption limit from the current Rs 2.5 lakh to Rs 5 lakh. If this comes into being, the individual will have more disposable income in their hands.

Here, we list some expectations of taxpayers from the budget 2023.

Section 80C

This is the most popular tax-saving section that the individual can claim. The maximum deduction you can claim in one financial year is Rs 1.5 lakh. This section essentially encourages you to invest your money. Investing in this section gives a win-win situation where one can not only save taxes but also earn high returns from the money invested. Option where we can invest under section 80C.

  • EPF (Employee’s Provident Fund)
  • ELSS (Equity Linked Saving Schemes)
  • PPF
  • Other options under this section include NPS (National Pension Scheme), repayment of the principal of a home loan, children’s school fees, FDs (Fixed Deposits), ULIP (Unit Linked Insurance Plan), SSY (Sukanya Samrudhi Yojana), etc.

Under section 80C of the Income Tax Act

Due to higher inflation rates individual is facing problem with reducing cash in their pockets, therefore, it is highly recommended that the government should increase the exemption limit under section 80C. Since 2019 there is no change in the exemption limit it has been remaining the same under Rs 1.5 lakh thus the government has extended the list of exemptions under section 80C.

Section 80D

Medical investments are always a better option to safeguard oneself from unforeseen medical emergencies. Adding medical insurance to the investment portfolio not only provides health coverage but also allows an individual to avail themselves of tax benefits according to Section 80D of the Income Tax Act, 1961.

An individual can claim a deduction of Rs. 25,000 on insurance for self, spouse, or dependent children under Section 80D. An additional deduction of Rs. 25,000 is available for the insurance of parents if they are less than 60 years of age and Rs. 50,000 if they are over the age of 60 years.

Post Covid people have become more and more aware of getting their medical insurance done and to promote this awareness further government should increase the exemption limit so that more and more people opt the medical insurance.

Standard Deductions

Salaried employee has to pay taxes on their income as they have very little option to avail exemption under head salary one of the major exemption that they claim is standard deduction but since past four years, the deduction amount remained the same. The implementation of the standard deduction means that salaried employees can claim an exemption of Rs.50, 000 out of their taxable income.

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Slab Rate

Excitingly two slab rates are going on which is very confusing for the common people. It is today’s requirement to make the tax structure more simple and understandable for journal people. It is the first and four most require that the tax slab should be simpler and the government should increase the limit of the maximum amount not chargeable to tax that is Rs 2.5 lakh which gives a common person the to save more and invest more.

Limit of Standard Deduction to be increased to factor Inflation – Section 16 (ia)

The standard deduction u/s 16(ia) of the IT Act of Rs.50,000 p.a. that is allowed to a salaried employee is expected to be enhanced to Rs.75,000 p.a. considering the current inflation levels and also the increased cost of living. Alternatively, instead of increasing the limit by a fixed amount, the one-time annual increase in the standard deduction limit may also be linked to the inflation rate.

(The author is MD of Neeraj Bhagat & Co. Views expressed above are personal)

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First published on: 30-01-2023 at 10:38 IST