A few days are left for Budget 2023, and the common people have several expectations from the finance minister . Like every year, one of the key expectations is that the tax slabs will be revised so that people have more disposable income.
Income tax slabs need to catch up with inflation. Here's what they should be today. Read on to find more.
A few days are left for Budget 2023, and the common people have several expectations from the finance minister . Like every year, one of the key expectations is that the tax slabs will be revised so that people have more disposable income.
According to a recent report by BankBazaar, income tax slabs have not kept pace with inflation, and there is a strong case for them to be revised. For example, 10 years ago, what was Rs 100 now equals Rs 150, that is, by how much the cost of inflation rose.
While this has not affected those earning Rs 5 lakh or fewer, people in the 20 per cent and 30 per cent tax brackets are paying more tax as the tax slabs remained unchanged for the last 10 years. The 20 per cent and 20 per cent tax slabs were last enhanced in 2013-14. Due to inflation, those in the 20 per cent and 20 per cent tax brackets are paying 26.4 per cent and 41.3 per cent tax in real terms. So someone with an income of Rs 60 lakh is effectively paying 50 per cent tax even though the tax rate is 30 per cent.
Given these disparities, the following proposals are on people's wish lists.
Enhance 20 Per Cent And 30 Per Cent Tax In Old Regime: The upper limit for the 20 per cent tax slab should be moved to Rs 15 lakh from Rs 10 lakh for the next 10 years to factor in inflation.
Enhance 80C Limit: The 80C limit was last enhanced in 2014 to Rs 1.5 lakh. Under the old tax regime , it is the most popular section for taxpayers to claim deductions. So if the limit is increased to Rs 2 lakh from Rs 1.5 lakh, it will provide much relief.
Separate Home Loan Deductions From 80C And Increase Limit: Currently, Rs 1.5 lakh is the deduction on home loan interest payments u/s 80C and Rs 2 lakh for interest payments u/s 24B. However, several other deductions are available under 80C, and homebuyers cannot benefit from principal deductions in most cases. Moreover, home loans have become expensive, with the RBI raising the repo rates by 225 basis points from Mat 2022 to December 2022. Therefore, a single deduction up to Rs 5 lakh (80C, 24B, and 80EEA deductions) without sub-limits for principal and interest would help homeowners manage their home loans better.