Expectations from Union Budget 2023: Increasing the tax base for more relief

Union Budget 2023 and the need to enhance the tax base

 Increasing the tax base

The Union Budget 2023 will be announced on 1st February 2023 and will be the last full budget the government proposes before next year’s election. As the budget season kicks in, experts and taxpayers set their expectations. Most look forward to changes in the personal finance rules, especially tax rules, for higher tax reliefs.

Considering the fact that the Union Budget 2022 didn’t offer much tax relief, individuals believe that this budget might focus on that. One of the major expectations is the enhancement in the tax base, like the new Concessional Tax Regime (CTR) introduced earlier.

CTR – the concept

Concessional Tax Regime is the new tax regime that the finance minister introduced in the Union Budget 2020. The regime allowed lower tax rates at higher income levels. Have a look –

Concessional Tax Regime

Though the rates were reduced, the deductions and exemptions available under the existing regime were disallowed. For instance, deductions under Section 80C, 80D, 24(b), etc, were disallowed under the new regime.

Related - New tax regime v/s the old one. Should you switch? Find out here!

While the finance minister touted the CTR to be a better regime for tax relief, few individuals opted for it, given the non-availability of popular deductions. Hence, there are expectations from the next budget to make the CTR attractive.

Expectations from Union Budget 2023

  • Change in the tax slab

Firstly, people want the finance ministry to change the tax slab rates overall. Instead of a threshold limit of Rs.2.5 lakhs, people want the limit to be enhanced to Rs.5 lakhs. Thereafter, the tax rates might start from 7.50% and increase by 5% for every Rs.2.5 lakh increase in the income level.

  • Tax benefit on the standard deduction

A standard deduction of Rs.50,000 was introduced for salaried employees in the Union Budget 2019. However, the CTR disallowed the deduction. As such, people hope that the CTR includes the tax benefit on standard deduction for salaried employees.

  • Availability of popular deductions under Section 80

While the various sections under Chapter VI A of the Income Tax Act, 1961, have been disallowed, taxpayers want the CTR to allow some popular deductions. These include deductions under Section 80C (up to Rs.1.5 lakhs), 80D(up to Rs.50,000) and 80CCD(up to Rs.50,000) that can help save tax and also invest. Importance can be given to specific investments under Section 80C that are allowed under the CTR, like life insurance, Public Provident Fund, home loans, etc.

Time will tell what the budget actually introduces, but till then, taxpayers are keeping their fingers crossed for enhanced tax relief.

Related - Here's a list of tax-free incomes under the new regime

The Union Budget 2023 will be announced on 1st February 2023 and will be the last full budget the government proposes before next year’s election. As the budget season kicks in, experts and taxpayers set their expectations. Most look forward to changes in the personal finance rules, especially tax rules, for higher tax reliefs.

Considering the fact that the Union Budget 2022 didn’t offer much tax relief, individuals believe that this budget might focus on that. One of the major expectations is the enhancement in the tax base, like the new Concessional Tax Regime (CTR) introduced earlier.

CTR – the concept

Concessional Tax Regime is the new tax regime that the finance minister introduced in the Union Budget 2020. The regime allowed lower tax rates at higher income levels. Have a look –

Concessional Tax Regime

Though the rates were reduced, the deductions and exemptions available under the existing regime were disallowed. For instance, deductions under Section 80C, 80D, 24(b), etc, were disallowed under the new regime.

Related - New tax regime v/s the old one. Should you switch? Find out here!

While the finance minister touted the CTR to be a better regime for tax relief, few individuals opted for it, given the non-availability of popular deductions. Hence, there are expectations from the next budget to make the CTR attractive.

Expectations from Union Budget 2023

  • Change in the tax slab

Firstly, people want the finance ministry to change the tax slab rates overall. Instead of a threshold limit of Rs.2.5 lakhs, people want the limit to be enhanced to Rs.5 lakhs. Thereafter, the tax rates might start from 7.50% and increase by 5% for every Rs.2.5 lakh increase in the income level.

  • Tax benefit on the standard deduction

A standard deduction of Rs.50,000 was introduced for salaried employees in the Union Budget 2019. However, the CTR disallowed the deduction. As such, people hope that the CTR includes the tax benefit on standard deduction for salaried employees.

  • Availability of popular deductions under Section 80

While the various sections under Chapter VI A of the Income Tax Act, 1961, have been disallowed, taxpayers want the CTR to allow some popular deductions. These include deductions under Section 80C (up to Rs.1.5 lakhs), 80D(up to Rs.50,000) and 80CCD(up to Rs.50,000) that can help save tax and also invest. Importance can be given to specific investments under Section 80C that are allowed under the CTR, like life insurance, Public Provident Fund, home loans, etc.

Time will tell what the budget actually introduces, but till then, taxpayers are keeping their fingers crossed for enhanced tax relief.

Related - Here's a list of tax-free incomes under the new regime

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