Union Budget 2023 Highlights:

  • No taxes up to Rs 7 Lakhs annual income under the new tax regime
  • The surcharge rate is reduced from 37% to 25%
  • Standard deduction of Rs 52,500 for Rs 15.5 Lakhs or more Income Slabs
  • Increase in CAPEX to Rs 10 Lakh crores, 33% higher compared to 2022-23
  • Tax hiked on Cigarettes by 16%
  • Railways get a big chunk in Budget 2023-24, an allocation of Rs. 2.4 Lakhs crores capital
  • One-time Small Savings Scheme, ‘Mahila Samman Savings Certificate’ is introduced to encourage women to start investing; available for only 2 years
  • ‘Senior Citizen Saving Scheme’ limit increased from 15 lakhs to 30 Lakhs
  • The TDS Rate was reduced to 20% from the current 30% on taxable withdrawal of EPF for people without PAN
  • New Income Tax Regime is now the default for taxpayers, while the old regime is optional
Click here to delve into the main highlights of Union Budget 2023-24.

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Budget 2023 Impact Analysis

 

At Tax2win we have been following The Budget 2023 very closely. Our team of expert CA's, CS, Advocates and Lawyers have done an in-depth analysis of various budget pronouncements. Read more...

Pre-Budget Expected Amendments 2023

Budget 2023 will be presented by the Hon’ble Union Finance Minister, Ms. Nirmala Sitharaman, on February 1, 2023, at the parliament of India. The expectations from the forthcoming budget are very high due to the pandemic strike. Here are a few expectations related to the Income Tax Changes:

  • Increase the limit of Medical Insurance Premiums under section 80D:
    During the pandemic, we all have realized how important it is to take care of our health and to need medical insurance to avoid any unexpected expenses. To encourage more people to avail of medical insurance, it is expected to increase the threshold allowed under section 80D from Rs. 25,000 for self & family ( Rs. 50,000 in case of senior citizens) and Rs. 25,000 for parents (Rs. 50,000 in case of senior citizens) to Rs. 50,000 in all cases.

  • Introduction of Marginal Relief in cases where Taxable Income is slightly higher than Rs. 5 lakh:
    Currently, the Income Tax exemption limit is Rs. 2.5 lakhs/ year under both the new and the old income tax regime. Rs.12500 rebate is available u/s- 87A if the income is up to Rs. 5 Lakhs. This means individuals earning up to Rs. 5 lakh are not liable to pay any taxes. Above this slab, i.e., income between Rs. 5 lakhs and Rs. 10 lakhs, individuals have to pay 20% tax, and further on. Individuals with an income of Rs. 501000 will end up paying Rs. 12700. It is recommended to introduce marginal relief for taxpayers where their income increases slightly above Rs. 5 lakhs like it is available in the case of a Surcharge.

  • Increase Home Loan deduction:
    There is a compelling reason for raising the deduction under Sec 24(b). In the past five years, property prices across the country have risen. Even a modest 2-BHK house in a metro now costs upwards of Rs 70-80 lakh. Assuming a loan to cover 75% of the value of the property, the buyer requires a loan of Rs 50-60 lakh. The deduction of Rs 2 lakh on a self-occupied property, will not be able to fully cover the interest paid on such a loan and therefore the limit needs to be hiked to at least Rs 3 lakh, regardless of the price of the property.

  • Increase the deduction limit of NPS Investment and make it completely tax-free withdrawal:
    The Union government should consider increasing the additional deduction limit for individuals from ₹ 50,000 to ₹100,000 when it comes to NPS. Today, the Section 80C limit of ₹150,000 is not enough for many taxpayers to save tax. Increasing the NPS limit for additional deductions will help people to save tax and encourage long-term investing. Also, the government should look at making it EEE (Exempt Exempt Exempt) from a taxation perspective. At present, NPS account holders can withdraw 60 percent at vesting age which is tax-free and the remaining 40 percent is to be invested compulsorily in annuities. Similar to PPF, NPS withdrawal must be completely tax-free.

  • Increase the threshold of Section 80C:
    Deduction u/s 80C is the most common tax saving avenue that taxpayers avail. In 2014, the limit for maximum deduction under Section 80C was raised to Rs. 1.5 lakh. Section 80C covers so many tax saving investments that the benefit of all tax saving investments cannot be availed because of the threshold. And, no more scope is left for further tax saving under Section 80C. Enhancement in the maximum deduction limit under Section 80C to at least Rs. 2.5 lakhs is expected from the upcoming budget.

  • LTCG tax on Equities:
    The reintroduction of the LTCG tax had caused a massive dent in the investors’ confidence. The government should exempt long-term capital gains on the sale of Indian-listed equity shares. Alternatively, it should grant the aforesaid tax exemption to investors who have held the securities for more than two years. Major economies do not have LTCG tax. The government could consider eliminating this levy to boost investment through the stock exchange.

  • Standard deduction can be increased:
    As per the current taxation system, a salaried individual can claim a standard deduction of Rs.50,000 from their salary income without showing any declarations & proofs of expenses. The standard deduction was introduced to salaried taxpayers to take care of the expenses generally not covered under income tax provisions. Due to a periodic rise in inflation, and an increase in expenses due to the continuation of the hybrid working model, it is the need of the hour to increase the standard deduction limit. Salaried-class taxpayers are expecting a rise up to Rs. 1,00,000/- in the standard deduction. Also, this limit for army personnel must be high.

  • Standard deduction under the house property can be increased:
    To reignite the momentum in the real estate sector, the Government may assess enhancing the standard deduction of 30 percent of Net Annual Value to 40 percent.

  • Meal allowance can be increased:
    Taking into consideration rising food inflation over the last decade, the current exemption of Rs 50 per meal per employee if the employer is providing food is to be increased to Rs 100.

  • Increase the deduction limit under Section 80TTA:
    As per section 80TTA, a deduction of up to Rs. 10,000 per annum is granted for interest on saving bank accounts. For generations, an individual preferred to keep money in savings accounts held with banks and post offices. The benefit of investing in a savings account is that the money can be used whenever needed. There have been no changes in the threshold limit since its introduction. Also, the rate of interest for savings accounts is very low. Thus, to levy the tax on interest income up to Rs 20,000 must be exempted.

  • Basic exemption limit for senior citizens should be Rs. 5 lakh:
    At present, senior citizens are not required to pay tax on income up to Rs. 3 lakh. It is expected that even if the basic exemption is not increased for normal citizens, the limit should be increased for senior citizens. The limit should be increased to Rs. 5 lakh to bring them on par with super senior citizens.

  • Introduce tax relief for investment in education fund:
    “Padhega India, Tabhi Toh Badhega India '' a popular slogan that means we can grow only if the people of our country are well educated. Education is a basic necessity for every individual. To encourage people to save for the education of their children rather than for their marriage. The government should make an education fund to which people can contribute and which should be eligible for tax deduction of Rs. 25,000/- to Rs.50,000/- under a new section. Simultaneously, the deduction for tuition fees should be removed from section 80C.

  • Children Education Allowance:
    Education expenses are touching the sky but the limit of children's education allowance exemption has not increased since ages. Currently, an exemption of Rs. 100 p.m. per child is available for a maximum of 2 children which is equal to giving no exemption. It is expected from the upcoming budget to increase the amount of exemption up to Rs. 5,000/- per month per child.

  • Children Hostel Allowance:
    Currently, the exemption for children's hostel allowance is Rs. 300 per month per child for max 2 children which are very less compared to actual scenarios. It is also expected from the budget 2023 to increase the limit to Rs. 10,000/- per month per child.

  • Increase in no. of years under section 80E for education loan:
    An education loan helps you with higher studies and also offers tax saving deductions on the interest payment of a loan. It is expected to increase the present time limit of 8 years to 12-15 years since education loans are generally not repaid within 8 years and taxpayers lose tax benefits on the same.

  • Cut down the tax rate for professionals u/s 44ADA:
    Under section 44ADA, the presumptive taxation scheme, the benefit can be taken by specified professionals whose annual gross receipt is up to Rs. 50 lakhs. The profits are preassumed at 50% of the gross receipts, thus the income under sec 44ADA is 50% of presumptive turnover or actual profit, whichever is higher. This means an individual has to pay taxes on 50% of the revenue, which is not feasible for all. To bring harmony under the tax laws, an amendment is expected to reduce this rate to 35%-40%.

  • Reduce TDS rate for professionals:
    Currently, the rate of TDS is 10% on professional fees if the amount of payment exceeds Rs. 30,000/-. At the time of return filing, generally, the tax liability is less than the amount of TDS deducted and eventually, the amount of TDS gets refunded which just blocks the money of professionals. It is expected to lower the rate of TDS from 10% to 5% to avoid such issues.

  • Hike Family pension exemption limit:
    If any uncommuted family pension is received then it is exempt up to a certain extent. The current exemption limit is Rs. 15,000/- or ⅓ rd of the amount received, whichever is lower. The said limit of Rs. 15,000 should be increased to Rs. 100,000/- considering the actual amount of Pension nowadays and to provide the benefit genuinely to the receiver of the Pension. The family pension is taxable under the head of income from another source due to which the benefit of a standard deduction of Rs. 50,000 is also not available for Family Pension which is available for salary-class persons.

  • Increase rent limit under Section 80GG:
    Deduction u/s 80GG in respect of rent payment was introduced to provide the benefit to individuals whose CTC does not contain the HRA component and for self-employed individuals. The maximum deduction of rent payment is Rs. 5,000/- per month in the era of such high rent expenses not only in tier-1 cities but tier-2 cities are also giving equal competition. It is expected to increase the said limit to Rs. 10,000/- per month.

  • Preventive Health checkup upto Rs. 10,000/- :
    A big amount of expenses are incurred by a common man on regular health checkups for himself, his spouse, children & parents. But the maximum amount of deduction for a preventive health check-up in total is allowed upto Rs. 5,000/- which is expected to increase upto Rs. 10,000/-

  • HRA exemption: Add more cities to metro cities
    When you receive HRA as a part of your salary, it is not fully taxable. It is exempt up to a certain extent. However, the limit of exemption is different for metro and non-metro cities. Only four cities are considered Metro cities which are Delhi, Mumbai, Chennai, and Kolkata considering the high rent expenses in these cities. But in the past few decades, some cities have seen a steep rise in infrastructure & development which results in an increase in rent expenses in such cities also like Bengaluru, Hyderabad, Pune, Ahmedabad, Jaipur, Noida, Gurgaon which are expected to be included in the list of metro cities.

  • Allowance & standard deduction for Indian Armed forces:
    Armed forces work hard for the safety of our nation. They sacrifice their whole life for the sake of the nation. So this is the responsibility of the government to provide them with some special benefits. Some allowances are exempt for armed forces subject to some conditions. It would be great if the budget introduces some additional allowances and exemptions for our armed forces without any conditions along with an increased amount of standard deduction up to Rs. 1,00,000/-.

  • Reduction in tax rates for partnership firms and LLPs:
    The rate of corporate tax was reduced for companies from 30% to 25%. However, this reduction was not done for partnership firms, AOPs and LLPs. The budget is, therefore, expected to reduce the tax rate to 25% for these business entities as well.

  • Investment in ELSS Funds
    At present investment in ELSS funds is also included under Section 80C. The limit of 1.5 lakh under Section 80C already gets exhausted by other investments like LIC and PPF. Hence the addition of a separate section for Investment in ELSS Funds will be a great help for the taxpayers and it will encourage more people to invest in such funds.

FAQs on Budget 2023

Q- What is the date of Budget 2023?

The Union Budget 2023 will be presented on, Wednesday 1st Feb 2023.

Q- Who prepares the Union budget?

The budget is a detailed planning allocation of economic resources of the country for the upcoming fiscal year. Since it has a major impact on all sectors, the budget is prepared in harmony with different ministries. Recommendations from all the ministries are submitted to the finance ministry for their demands, which are further analyzed by the budget division.

Q- Who will introduce Budget 2023-24?

Budget 2023 will be introduced by the Hon’ble Finance Minister Nirmala Sitharaman before the Parliament of India on 1st Feb 2023.

Q- What is the Interim Budget?

The interim Budget is presented by the ruling government when elections are due in the fiscal year. Hence, the ruling government cannot make strategic decisions for the complete fiscal year in which it might or might not have the ruling powers. The last Interim Budget was presented in 2019 by former Finance Minister Piyush Goyal.

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