5 Employee Income Tax Expectations for The 2023 Union Budget
According to a published post by Financial Express, India has more than 80 million taxpayers and of which besides corporates, salaried class taxpayers form a significant chunk. The most awaited regulatory announcement is the annual budget, which directly affects the finances and budget of the salaried class as any reliefs/deductions or changes in tax rates. Here is the list of the things to expect from the budget for 2023:
1. Improving savings-based Tax deduction:
Section 80C Deduction, 1961(‘IT Act’) covers several savings deductions such as Employees’ contribution to RPF/Superannuation Fund, LIC, PPF, etc. But, it is also worth mentioning that the total limit is narrowed to Rs 1,50,000 p.a. and was last amended in the 2014 budget. Per se, the current US 80C deductible limit was increased by Rs. 200,000 p.a.
2. Raised Standard Deductible Limit for Factor Inflation:
Section 16 of the IT Act of Rs. 50,000 p.a. permitted for employees expected to be increased to Rs. 75,000 p.a. regarding the current rate of inflation and the rising cost of living.
3. Rationalization of Holding Period of Debt Funds, Bonds, or Debentures:
The minimum holding period for calculating long-term capital gains is 3 years, therefore, an investor must hold such securities to be classified as taxable long-term capital gains in u/s 112 of the IT Act. 12 months, for listed shares, equity mutual funds, etc. 24 months for unlisted shares and investments.
4. Raising Limit for Some Allowances:
Rs. 100 per child per month. Children’s Hostel Expenditure Allowance is Rs. 300 per 300 per month per child. Such limits are out-of-line with current cost and need that has not been revised upwards in over 20 years and should be adjusted for inflation. Given the significant increase in the cost of education, it is expected that the thresholds mentioned will be rationalized to make them more timely and realistic.
5. Raised Limits of Rs. 50,000 for Contributions to Particular Pension Schemes:
Under Section 80CCD(1B) of the IT Act, salaried workers can claim an annual deduction of Rs. 50,000 for contributions to the National Pension Scheme, Atal Pension Scheme, etc. To encourage investment in retirement plans, the investment limit under Section 80CCD(1B) is to be increased from Rs.50,000 to Rs.100,000 per year.