As the federal budget approaches, the middle class is eagerly awaiting some income tax reform that will allow them to cut their taxes. Their budget expectations in this regard are very high as it will be the last full budget of the incumbent central government led by Narendra Modi and the upcoming budget is expected to be a populist one. . The middle class is expecting that there will be an increase in some of the tax exemption limits available under different categories like Section 80C, Section 80D, Section 87A, etc.
On how income tax reform could cheer the middle class, Archit Gupta, Founder & CEO at Clear said: “We anticipate that the Coalition budget 2023 will leave middle- and lower-income earners with more disposable income in their hands. This will allow them and their households to use this extra income to meet their consumption needs.”
As to why he expected such a reduction in income tax from the Finance Minister Nirmala SitharamanArchit Gupta said, “The past few years have been difficult for many people due to the ongoing crisis Pandemic caused by covid-19, rising inflation, a war-like crisis, layoffs, rising healthcare costs, and fears of a global recession. To address these issues, the Indian government will most likely focus on stimulating demand in various industries.”
On the income tax reforms the middle class can expect from Nirmala Sitharaman, Clear’s Archit Gupta listed the following five relief measures he looks forward to in the 2023 budget:
Increase base immunity limit
Several options are being considered to boost consumption, but many reports suggest that the government is considering raising the basic duty-free limit from $2.5 thousand to $5 thousand. This may not affect resident individuals income to $5 lakh because they always get a discount under section 87A. However, it will remove the requirement for them to submit required documents tax refundthus supporting the government’s goal of making compliance easier for small taxpayers.
Increase within Section 80C . limit
Current limit of Rs. 1.5 thousand for investment Section 80C deductions, which have not been updated in more than a decade, should be increased to allow for more tax savings and increased investment.
Modifications within Section 80D . limits
India’s middle class is looking for ways to raise their standard of living, including access to affordable housing and improved healthcare facilities. With the increase in health insurance costs after Covid, the threshold for these deductions should also be raised to better meet the financial burden on the middle class. The scope of Section 80D should be expanded to include health care expenses such as physician consultation fees and diagnostic testing costs.
Relief for homebuyers
Buying a home is still considered a luxury for middle-class taxpayers. To ease this burden, taxpayers are calling for an increase in the home loan interest deduction from the current limit of $2 thousand. Alternatively, homebuyers can also avail of the 80EEA sectional deduction for up to Rs. 1.5 lakhs interest payment on home loans approved from April 1, 2019 to March 31, 2022. To further encourage home ownership, lock-in period and threshold for deductions This can be extended.
Increase the standard deduction
Five years ago, the standard deduction was introduced in the 2018-19 financial year. Now, in the face of rising medical and fuel costs, there is a strong case for increasing the standard deduction limit from $50,000 to $1 thousand.
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