Expectations of salaried class from Budget 2023-24

Budget 2023-24 is special because of two reasons (a) it is the last full-fledged union budget of the current government before Lok-Sabha elections (b) it is presented amidst predictions of a global recession.

Rukmani Jaiswal
Updated on: 24 Jan 2023 1:08 PM GMT
Expectations of salaried class from Budget 2023-24
X
  • Whatsapp
  • Telegram
  • Linkedin
  • Print
  • koo
  • Whatsapp
  • Telegram
  • Linkedin
  • Print
  • koo
  • Whatsapp
  • Telegram
  • Linkedin
  • Print
  • koo

After the self-resilient budget 2021-22' and the era-of-elixir budget 2022-23, India is all set to witness it's Amritkaal Budget 2023-24. Each budget has its importance and carries heavy-weighted expectations. But budget 2023-24 is special because of two reasons (a) it is the last full-fledged union budget of the currentgovernment before Lok-Sabha elections (b) it is presented amidst predictions of a global recession.

The salaried middle-class, the highest-income taxpayers, have high expectations from this budget. Since 2014, the salaried class haven't got manyincome tax breaks from the finance minister (FM) and hence is disappointed. As this is the last full budget of this government, the expectation of the salaried class is at an all-time high.In a recent interview, FM claimed that she also belongs to a middle-class family and understands their pain. Such a statement can be attributed to the pre-poll strategy to get the much-needed attention ofthe salariedclass. Hence, it is very much on the cards that FM is planning to make some announcements to incentivizethe taxpayers in the forthcoming budget.

Based on interviews with several salaried people, financial advisers and taxexperts, the following expectations of salaried class people from this budget are tossed for consideration.

Basic Exemption Limit, Tax-regime and Rate

This minimum exemption cap of ₹2,50,000isunchanged since FY 2014-15 in the oldtax regime and persisted similarly in the new tax regime. In the much-awaited upcoming budget, this exemption limit for individual taxpayers (below 60 years)is expected to increasefrom ₹2,50,000 to ₹5,00,000. Such relaxation can reduce the prior disappointments of the salaried class, can provide shield against inflation and raptly increase consumption due to enhanced purchasing power.

Further, due to the complexities,waived deductions andmultiple taxrates, the taxpayers are not optingfor it. There is a need to address the hindrances of the new tax regime. Many experts also focussed on combining both regimes. Also, the income tax slab needs to be rationalised. The proposed rate structure can be:

Income Tax Rate

Upto Rs 5,00,000 Nil

Rs 5,00,001- Rs 7,50,000 5%

Rs 7,50,001- Rs 10,00,000 15%

Above Rs 10,00,000 25%

Proposed Tax Slab

House Rent Allowance (HRA)

HRA is partly taxable allowance provided to employees towards rent payment exempt upto the amount least of actual HRA received or excess of 10% of salary over actual rent paymentor 50/40% of salary (Metro/Other Cities). The HRA allowed for metro and non-metro cities is varied based on the standard of living cost. However, the standard of livingcost amongthe metro and non-metro cities hasreached nearly at par, for instance, Delhi and NCR. So, there is a need to review the discrimination policy and bring unification in the HRA rates.

Standard Deductionsu/s 16(ia)

To provide some relief to salaried taxpayers, FM announced a flat deduction of ₹40,000u/s 16(ia)from the total salary of the employees. It was eventually raised to ₹50,000. Now, people are expecting that FM may further raise this deduction to₹75,000 for the salaries class.

Deductions from Gross Total Income (GTI)

U/s 80C: Contribution to LIP, SPF/PPF/RPF, NSC VIII, investment in approved ULIP/UTI/mutual fund/schemes, SSY etc. can be claimed for deduction from GTI subject to the maximum limit of ₹1,50,000. This upper cap is not changed for the last 8 years, but inflation jumped by 46% in the same period. Now, the relevant deduction is expected to rise to at least ₹2,00,000.On one hand, it will increasepersonal disposable income and on the other hand, it will boost savings and investment rate in specified schemes. Also, section 80CCEconfines the cumulative amount of deduction u/s 80C, 80CCCand 80CCD(1) to ₹1,50,000could beraisedto ₹2,50,000 to get the advantage of other sections too.

U/s 80D:The limit of ₹25,000/50,000(senior citizen) for non-cash payment of health insurance premium/CGHS/health check-ups and the medical expenditure needs serious revision. To widen the health insurance coverage among the population and meet the hyped medical expenses, the maximum limit can be raised by 100%.

According to the CMIE reportpublished in October 2022, the country records 8.47 crore salaried people. As India is in its golden-economy period,as predicted by World Bank's report, she is all set to witness a remarkable change in income and consumption patterns. The proposed tax benefits can significantly increase the earning-in-hands of such people, improve their living standards and contribute better in the growth and development of the economy. Furthermore, these tax relaxations have the potential to address some of the major underlined wealth disparity concerns raised by the latest Oxfam report.

Rukmani Jaiswal

Rukmani Jaiswal

Research Scholar, DDU Gorakhpur University Member, Finance & Economics Think Council

Research Scholar, DDU Gorakhpur University Member, Finance & Economics Think Council

Next Story