Budget 2023 is just around the corner, and taxpayers across the country are eager to see what the government has in store for them. As the government prepares to unveil it’s Budget 2023 on 1st February 2023, taxpayers have several expectations they hope will be met.
- Tax relief
One of the biggest expectations on the minds of taxpayers is the hope for lower taxes. With the cost of living continuing to rise, many people are struggling to make ends meet, and a reduction in taxes would be a welcome relief. Whether it’s a reduction in income tax or a widening of the tax base, taxpayers are hoping for any kind of relief that will allow them to keep more of their hard-earned money in their pockets.
Also, the tax slabs have not changed since Budget 2017 except for introducing the new tax regime, which did not have many takers in the last two years. Most of the deductions and exemptions like HRA, LTA, 80C etc., which are popular amongst taxpayers, were withdrawn.
- Deductions and exemptions
The Finance minister should reconsider the 80C limit of Rs 1.5 lakhs, which has remained unchanged since 2014, despite a 50% increase in the consumer inflation index. The government can also evaluate the option of enabling this benefit under the new regime as well. An uptick in tax savings will leave people with higher disposable income that will, in turn, fuel the economic growth of our country. Additionally, 80C encourages taxpayers to invest in long-term savings, such as National Pension System (NPS), Public Provident Fund (PPF) etc., which can provide long-term finance for infrastructure projects in the country.
The government should consider extending the benefit of affordable housing, purchasing electric vehicles for two more years, and increasing the deduction threshold for these expenses. Additionally, the limits for health insurance premiums under Section 80D should be revisited, considering the exorbitant medical expenses.
- Renewable energy
To reflect India’s climate commitments at the COP26 and COP27 conferences, it is anticipated that the Union Budget for 2023-24 will prioritise decarbonisation, energy transition, and renewable energy.
Although India is currently the third-largest producer of renewable energy globally, much progress is still to be made. Despite efforts by the government to increase solar installation in the country, progress has been slow. Other countries, such as Turkey and Sweden, have implemented tax exemptions and subsidies to encourage solar energy use. To reach the 2030 Solar Mission Target, the government of India should consider introducing tax benefits for companies installing solar panels and for individuals installing rooftop solar panels.
- Salaried-class Taxpayers
Another area of concern for taxpayers is employment. With the pandemic causing widespread job losses, many are hoping for measures addressing layoffs and easing the hardship of employees. The current tax provisions provide exemptions on retrenchment compensation. However, to take advantage of the exemption, the employer must meet certain requirements to take advantage of the exemption. If the employer’s scheme does not meet these requirements, the employee may be unable to claim the deduction. Also, the deduction limit of Rs. 5,00,000 must be increased to at least Rs 10,00,000.
The current standard deduction of Rs 50,000 for employees under the old tax regime could be increased to Rs 1,00,000. The government should also consider extending this benefit under both old and new schemes.
- For Companies and Enterprises
Currently, different sectors in India are taxed at different income tax rates. To position India as a competitive hub for both manufacturing and services industries, companies are advocating for the introduction of a uniform corporate tax rate of 15%. This would bolster the manufacturing sector and allow the services sector to thrive.
That said, concessional tax regimes are offered for companies and individuals. However, partnership firms and LLPs are still taxable at a flat rate of 30%. The government could consider introducing a similar concession for them.
Overall, taxpayers are hoping for a budget that addresses their concerns and helps to boost the economy while also improving the quality of life for citizens. Only time will tell if the Union Budget for 2023 will meet these expectations.
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