The government is set to announce the Union Budget 2023 on 1st February 2023, and taxpayers are curious to know what this Budget has in store for them. As per the income tax department, around 50% of the ITRs filed in 2022 were ITR-1 (filed by salaried individuals) which accounts for a large group of taxpayers. Salaried individuals expect major tax reliefs since they have been grappling the past few months given the harsh impact of tech layoffs, pay cuts and rising inflation.
Some of the major expected changes from Budget 2023 are enumerated below:
1. Tax slabs
The current tax slab with a basic exemption limit of Rs. 2.5 lakhs is anticipated to be increased to Rs. 5 lakhs under both tax regimes. This will have a flow-on effect on higher-income individuals as well.
The limit of Rs 2.5 lakhs for exemptions has not been changed since 2014-15. It must be reviewed considering factors like inflation. The new tax regime wasn’t received well by the taxpayers. The government may simplify the tax system by merging both regimes.
2. Higher Standard deduction
The government may increase the standard deduction limit from Rs. 50,000 to Rs. 1,00,000 in this Budget.
3. Enhanced 80C and 80D limit
We can see an increase in the Section 80C deduction limit from its current threshold of Rs. 1.5 lakhs to Rs 2.5 lakhs after nearly a decade. This will incentivise people to invest in government-related schemes like National Savings Certificates, Public Provident Funds, LIC, etc., giving thrust to the infrastructural development in the country.
Likewise, the government may also consider increasing the deduction limits under Section 80D from Rs. 25,000/Rs. 50,000 to Rs. 50,000/Rs. 1 lakh, respectively, given the exorbitant medical expenses and hospitalisation costs.
4. Slash the Surcharge rate
The surcharge rate of 37% brings up the tax to 42.744% for people earning more than Rs. 5 crores. It is time the government rationalised and revisited the surcharge rates.
5. Enhancement of other deductions
This is the last year for claiming deductions like 80EEA (interest on housing loan) and 80EEB (electric vehicle loan). We can expect to see a 2-year extension on these deductions.
6. Revisiting Children’s Education and Hostel Allowance
How much do you think a child’s education would cost in the present times? The Child Education and Hostel Allowance have remained static at Rs. 100 and Rs. 300 per child per month for over 20 years. The government must consider raising the limits to Rs. 1,000 and Rs. 3,000 per child per month, respectively.
These are the major expectation from the Budget 2023 for salaried individuals. Check out this detailed post on Budget 2023 expectations and recommendations for salaried individuals.
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