The Modi government plans to change the income tax slabs in the new tax regime before the 2024 Lok Sabha elections. This could be a big relief for taxpayers and salaried individuals, as the new tax regime is less lucrative than the old one. The Ministry of Finance is also working to make the new tax regime more attractive, by increasing the taxable income exemption from the existing limit of Rs 2.5 lakh to Rs 3.5 lakh or Rs 4 lakh.
Current tax slabs under new Income Tax regime
|TAXABLE INCOME||TAX RATE|
|Rs 2.5 lakh to Rs 5 lakh||5%|
|Rs 5 lakh to Rs 7.5 lakh||5%|
|Rs 7.5 lakh to Rs 10 lakh||15%|
|Rs 10 lakh to Rs 12.5 lakh||20%|
|Rs 12.5 lakh to Rs 15 lakh||25%|
|Rs 15 lakh and above||30%|
The Union Budget for 2023-24 is scheduled to be presented on February 1 by Finance Minister Nirmala Sitharaman. People with high expectations of the budget hope to see relief from various issues, such as the cost of living, inflation, and the lingering effect of the global pandemic. The budget is also expected to address the situation of the salaried class and to create a savings and an investment-oriented economy. Additionally, more measures are needed to help startups grow, and Angel tax (a tax on angel investments) should be eliminated to provide more startup funds.
Mr. Sanchit Malik, co-founder and CEO of Pazcare, is proposing that the Indian government increase the limit on tax deductions for salaried employees from 80,000 rupees (US$1,500) to 1.5 million rupees. He is also suggesting that the government increase the deduction limit for health insurance premiums from ₹75,000 to ₹1.5 million rupees, and that the government create a separate exemption category for life insurance premiums. Mr. Malik believes that these measures will help to increase insurance penetration in India and reduce financial risk in the system, while also providing development capital to the economy.
People who make more money pay more taxes. This year, the government is hoping to give some of those people a break by increasing the minimum tax slab from Rs. 2.5 lakhs to 5 lakhs, increasing the school’s fee slab for exemption, increasing the limits for 80C, and giving health care incentives to lower-paid people. Additionally, the government is doing things like increasing the monetary policy measures to boost savings and increasing the basic limit to Rs. 5 lakhs.
We think the government could make changes to tax laws to make it easier for people to save money, and to help the economy grow. One change that we think would be helpful is increasing the deduction limit for contributions to provident funds, equity-linked savings plans, and life insurance premiums. This would make it easier for people to cover the costs of things like travel and telephone bills while they’re working. Another change we think the government should make is increasing the standard deduction for salaried employees. This would make it easier for people to deduct the costs of things like health insurance and car repairs from their taxable income. Finally, we think the government should make interest on loans secured by real estate deductible. This would make it easier for people to pay off their mortgages and other loans.
We think that the government’s budget for 2023 will adjust the tax rates. In 2020, the government implemented a new tax system with lower tax rates, but some things have to change so that people can take advantage of this benefit. For example, people have to give up some of their deductions and exemptions. In addition, there is an exemption for money that has already been taxed. But, there is not an explicit exemption for money that has been taxed in the past. Taxpayers also don’t have enough opportunity to correct any errors or omissions on their tax returns. Finally, most countries have fiscal years that are different from India’s. This creates problems for people who claim a foreign tax credit because the overseas tax return isn’t accessible within the deadline for filing a revised tax return in India.