Budget 2023: 5 income tax relief measures that middle class expects from FM Nirmala Sitharaman
As union budget is fast approaching, middle class is eagerly awaiting some income tax reforms that would enable them curtail their tax outgo. Their budget expectations in this regard is very high because this will be the last full budget of the incumbent Narendra Modi-led central government and the upcoming budget is expected to be a populist budget. Middle class is expecting that there would be rise in some tax exemption limits available under various sections like, Section 80C, Section 80D, Section 87A etc.
On income tax reforms that may cheer middle class, Archit Gupta, Founder & CEO at Clear said, “We anticipate that the Union Budget 2023 will leave lower and middle-income earners with more disposable income in their hands. This would enable them and the households to use this extra income to meet their consumption needs.”
On why he is expecting such income tax relief from the Finance Minister Nirmala Sitharaman, Archit Gupta said, “The past few years have been difficult for many people due to the ongoing COVID-19 pandemic, rising inflation, war-like crisis, layoffs, increased medical expenses and the fear of global recession. To address these, the Indian government will most likely focus on stimulating demand across various industries.”
On income tax reforms that middle class may expect from Nirmala Sitharaman, Archit Gupta of Clear listed out the following 5 relief that he is expecting in budget 2023:
Hike in basic exemption limit
Several options are being considered to boost consumption, but various reports suggest that the government is considering raising the basic tax exemption limit from ₹2.5 lakhs to ₹5 lakhs. This may not affect the resident individuals earning up to ₹5 lakhs as they always enjoyed a rebate under section 87A. However, it would eliminate the requirement for them to file mandatory tax returns, thus supporting the government’s goal of making compliance easier for small taxpayers.
Rise in Section 80C limit
The current limit of Rs. 1.5 lakhs for investment deductions under Section 80C, which has not been updated in over a decade, should be increased to allow for greater tax savings and increased investments.
Revision in Section 80D limit
Indian middle class is seeking ways to increase their standard of living, including access to affordable housing and improved healthcare facilities. With the increased cost of medical insurance post-Covid, the threshold for these deductions should also be raised to better accommodate the financial burden on the middle-class. The scope of Section 80D should be expanded to include healthcare expenses such as doctor’s consultation fees and diagnostic test costs.
Relief for home buyers
Buying a home is still considered a luxury for middle-class taxpayers. To alleviate this burden, taxpayers are calling for an increase in the deduction of home loan interest from the current limit of ₹2 lakhs. Additionally, home buyers can also take advantage of the deduction under section 80EEA for up to Rs. 1.5 lakhs for interest paid on home loans approved between April 1, 2019 and March 31, 2022. To further encourage homeownership, the lock-in period and threshold for these deductions may be extended.
Raise in standard deduction
Five years ago, standard deduction was introduced in FY2018-19. Now, in the wake of rising costs of medical expenses and fuel, there is a strong case for increasing the standard deduction limit from ₹50,000 to ₹1 lakh.
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