The Union Budget 2023 has been presented, and with it come a series of changes that will affect the income group of salaried individuals. With the increasing cost of living and rising inflation, people are already feeling the pressure on their finances and the recent layoffs in the tech sector have only added to the worries. In this blog post, we will take a look at the standard deduction on salary in the past budgets, the impact of Budget 2023 on income tax, salary deduction under the new tax regime, increase in tax rebate limit, and revisiting tax rates to sum up. Read on to find out how this budget could affect your finances.
Standard deduction on salary in the past budgets
Standard deduction on salary has been a popular topic of discussion in the past union budgets. In 2021, the government had increased the standard deduction from Rs. 40,000 to 50,000 for salaried individuals earning up to Rs. 5 lakhs annually. This move was aimed at providing relief to those who are already struggling financially due to high inflation and increasing cost of living.
In 2020, the government had also proposed to increase the standard deduction for senior citizens from Rs. 30,000 to Rs. 50,000 per annum; however, this proposal did not get implemented due to other pressing issues in the economy at that time.
The budget of 2019 had also included an additional tax benefit of Rs 10,000 under Section 16 (ia) for salaried individuals earning up to Rs 5 lakhs annually in order to provide some relief from taxation on their income.
In 2018, the government had introduced a number of measures pertaining to taxation on salary income including raising the limit for tax rebate under section 87A from 2 lakhs to 3 lakhs and introducing a new section 80TTB which allowed senior citizens more exemption on interest income earned from bank deposits and post office savings schemes up to 50 thousand rupees per year.
The 2017 budget had increased the limit of deductions available under section 80C from 1 lakh rupees per annum to 1.5 lakh rupees per annum along with introduction of additional deductions such as Additional Deduction up To 25 Thousand Rupees Under Section 80CCD (1b) For Contribution To National Pension Scheme (NPS).
It is clear that over the years successive union budgets have been focusing on providing relief through various means related to taxation on salary incomes; however it remains unclear as yet what changes will be made in Budget 2023 when it comes down standard deduction on salaries as we await further information about this important issue in India's economic climate..
Impact of budget 2023 on income tax
The Union Budget of 2023, presented on February 1st, has brought significant changes to the income tax structure in India. The new budget has proposed a number of new deductions and exemptions that are likely to benefit the salaried income group.
One of the most significant changes to the income tax structure is the introduction of a new standard deduction for all salaried individuals. This deduction is set at Rs 50,000 per annum and is available for all taxpayers regardless of their age or income level. In addition, there have been several other deductions made available for specific sections such as senior citizens and women taxpayers.
Another major change proposed under this budget is the exemption limit for long-term capital gains (LTCG). Under the previous taxation system, any LTCG over Rs 1 lakh was taxed at 10%. However, this budget proposes that any LTCG over Rs 2 lakh will be taxed at 20%. The lower rate will help reduce taxable income and thus aid in reducing overall tax liability.
The Finance Minister has also proposed an increase in the basic exemption limit from Rs 2.5 lakhs to Rs 5 lakhs per year. This increase will allow taxpayers earning up to Rs 5 lakhs per annum to not only save money on taxes but also benefit from additional deductions such as medical insurance premium payments and house rent allowances (HRA).
Finally, this budget proposes a number of measures to encourage digital payments among citizens by providing them with various incentives such as cashback offers on certain transactions. By promoting digital payments, it hopes to reduce black money transactions across India which will then lead to more transparent economic activities and better revenue collections for government authorities.
Overall, these changes proposed in Union Budget 2023 are likely to boost savings among salaried individuals and help them manage their finances better during these difficult times.
Salary deduction under the new tax regime
The new tax regime proposed in the Union Budget of 2023 has brought about some changes to salary deductions. Under the new regime, salaried employees will be able to avail a standard deduction of Rs 50,000 per annum. This means that their taxable income will be reduced by this amount and they will thus have some extra money in their pockets.
In addition to this, the exemption limit for long-term capital gains has been increased from Rs 2 lakh to Rs 5 lakh per annum. This means that any capital gains made beyond this limit will not be taxed as part of the regular income tax. Thus, salaried individuals can save more on taxes by investing in assets that generate long-term capital gains such as stocks and mutual funds.
Furthermore, the basic exemption limit has also been increased from Rs 2.5 lakhs to Rs 5 lakhs per annum under the new tax regime. This means that any income earned up to Rs 5 lakhs won’t be subject to taxation and hence can help reduce salary deductions significantly.
Moreover, various incentives have been introduced for digital payments which can further reduce salary deductions for salaried employees. These include cashback offers and discounts on digital payments made via debit cards, credit cards, UPI etc., which can lead to significant savings on taxes for salaried individuals if availed properly.
Overall, it is clear that with these changes proposed in the Union Budget of 2023, salaried individuals can expect some relief from their salary deductions and better manage their finances during these trying times.
Increase in tax rebate limit
The Union Budget of 2023 has proposed an increase in the tax rebate limit from Rs 2,500 to Rs. 12,500 for taxpayers with income up to Rs 5 lakhs. This will provide a much-needed boost to salaried individuals and help them save on taxes. Additionally, the tax rebate will be available only if they are paying their taxes through digital means such as credit cards, debit cards, net banking or UPI. This encourages people to switch to digital payments and helps make the whole process more efficient.
For those earning up to Rs 6.5 lakhs per annum, the budget proposes a deduction of up to Rs 1 lakh under Section 80C of the Income Tax Act 1961. This is applicable for investments such as life insurance premiums, EPF contributions and tuition fees for children’s education among others. Such deductions can reduce taxable income significantly and provide relief from salary deductions for salaried employees.
The budget also proposes an additional deduction of up to Rs 1.5 lakh per annum for interest paid on home loans taken after April 1st 2021 which is available over and above the existing limit of Rs 2 lakh per annum under Section 24B of the Income Tax Act 1961. This could potentially reduce salary deductions by a substantial amount for salaried individuals who have taken home loans recently or are planning on doing so soon.
Overall, these changes proposed in the Union Budget 2023 are sure to benefit salaried individuals significantly in terms of reducing their salary deductions and saving money on taxes overall. The government's commitment towards incentivizing digital payments will also help make the entire process easier and more efficient for taxpayers in India going forward
Revisiting tax rates
The Union Budget of 2023 has also proposed some changes to the tax rates for certain income brackets. The government has reduced the tax rate from 10% to 5% for those earning between Rs 5 lakh and Rs 7.5 lakh per annum, and from 20% to 15% for those earning between Rs 7.5 lakh and Rs 10 lakh per annum. This is expected to result in significant savings in taxes for salaried individuals with incomes falling within these brackets.
Moreover, the government also proposed a surcharge on taxable income above Rs 2 crore in order to fund social welfare initiatives such as healthcare, education, job creation etc. This will help ensure that those who are better off financially contribute more towards the development of the country.
The government also announced an increase in the health insurance premium deduction limit from Rs 25,000 per annum to Rs 50,000 per annum under Section 80D of the Income Tax Act 1961 for senior citizens aged 60 years and above. This will help senior citizens manage their medical expenses more effectively by reducing their salary deductions.
Overall, these changes proposed by the Union Budget of 2023 have been designed with salaried individuals’ interests in mind and should provide them with some relief when it comes to salary deductions due to income tax payments. It is important to keep track of any updates related to taxation laws in order to make sure that you are paying your taxes correctly and making optimal use of deductions available under various sections of the Income Tax Act 1961.
To sum up
To sum up, the Union Budget of 2023 brings some relief to salaried individuals looking to reduce their salary deductions due to income tax payments. The new standard deduction of Rs 50,000 per annum, an exemption limit for long-term capital gains over Rs 2 lakh, and an increase in the basic exemption limit from Rs 2.5 lakhs to Rs 5 lakhs per annum are sure to help salaried individuals save money on taxes and better manage their finances during these difficult times. Additionally, there are incentives for digital payments such as cashback offers and discounts on debit cards, credit cards, and UPI that can further reduce salary deductions for salaried employees. The government's commitment towards incentivizing digital payments will also help make the entire process easier and more efficient. Furthermore, the reduction in tax rates for certain income brackets and increase in health insurance premium deduction limit for senior citizens aged 60 and above should provide salaried individuals with some additional relief when it comes to salary deductions due to income tax payments. All in all, this Union budget is sure to be welcomed by salaried individuals looking for some respite from their financial burdens.
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