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Last Update: January 11, 2023, 09:48 AM IST
From income tax relief to headlines, the salaried middle class has a long wish list. How many of these will Nirmala Sitharaman wish on February 1?
There is speculation that the income tax exemption limit may be increased in the Union Budget 2023. But the enhanced standard deduction may be available only to taxpayers who have opted for the new income tax regime.
less than three weeks to go Narendra Modi The last full budget of the government before the 2024 Lok Sabha elections. And while the expectations are many, the most resonating is the much-needed tax break for the population segment that forms the largest chunk of Indian taxpayers – the salaried middle class.
Like every year, this year also the common man is expecting some kind of tax relief from Finance Minister Nirmala Sitharaman. The expectation has increased further from the general elections to be held next year.
The last few Union Budgets have not brought any relief among the Indian middle class by way of changes in tax slabs, tax rates or standard deduction. With savings hard to come by and pay cuts and layoffs triggered by the Covid-19 crisis, the middle class wants a break.
Discussions are on in the Finance Ministry and speculation is rife that the Union Budget 2023 may increase the income tax exemption limit or standard deduction. This limit could possibly be raised to Rs 5 lakh from the current Rs 2.5 lakh, which could lead to more disposable income. in the hands of the salaried class.
But there’s a twist. This increased exemption limit may be available only to taxpayers who have opted for the new income tax regime, which was introduced in 2020 and offers lower tax rates, but no actual tax saving deduction. The aim here could be to make the new simplified tax regime more attractive to people as only 10-12% of taxpayers have opted for it so far.
Tapati Ghosh, partner at Deloitte India, says that the government may also make some changes in the way the super-rich are taxed. India Perhaps the highest tax rate in your neighborhood for people earning more than Rs 5 crore. At 42.7%, it is higher than Singapore, Hong Kong and Malaysia.
“It is also important to ensure that there is no investment outflow from the country and for that perhaps a reconsideration of these rates is necessary,” Ghosh told News18.
Encouraging investment in the country is critical to sustaining the growth trajectory, especially at a time when the world is facing fears of a recession. One way to do this is through corporate tax, which currently differs for different brackets.
Kiran Mazumdar Shaw, Founder, Biocon Ltd, agrees with industry experts that corporate tax rationalization is the way forward. Says Shaw, “A corporate tax of around 15-20 per cent levied uniformly would go a long way.”
There has been no change in the income tax threshold since 2014. With repo rates being hiked multiple times in the last seven months, EMIs have gone up. Savings have dwindled with EPFO cutting interest rates and kitchen budgets have swelled with GST hike on everyday items.
“We have to ensure that more disposable income is left in the hands of the consumer, there is a need to increase demand and make the economy consumer driven,” says Saket Dalmiya, president, PHD Chamber of Commerce and Industry.
From income tax relief to headlines, the salaried middle class has a long wish-list. How many of these will Nirmala Sitharaman wish on February 1?
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