Read the blog to find out more about income tax and budget considerations for salaried individuals. The questions cover topics such as the calculation of income tax liability, the process of filing income tax returns, the components of a salaried individual's taxable income, and the standard deductions and exemptions that can be availed.
Overview
According to the income tax department, around 50% of the ITRs filed in 2022 were ITR-1, which was filed by salaried individuals and accounted for a large group of taxpayers. On February 1, 2023, Finance Minister Nirmala Sitharaman was scheduled to present her 5th Union Budget. In light of the current global recession, Sitharaman needed to balance maintaining a fiscal deficit and meeting public expectations. It was expected that the Union Budget 2023-24 would focus on job creation and enhancing funding for the manufacturing sector.
2023 Budget Expectations for Salaried Individuals
- Tax slabs: It is projected that both tax regimes will enhance the present tax slab’s basic exemption ceiling of ₹ 2.5 lakhs to ₹5 lakhs. A major effect of this action will also be felt by salaried individuals. Since 2014–15, the ₹.2.5 lakhs threshold for exemptions has remained unchanged; nevertheless, taking inflation into consideration, it may need to be revised. Although the new tax system was not well received by taxpayers, the government may possibly take into account combining the two tax regimes.
- Greater Standard Deduction: The government is anticipated to raise the standard deduction cap in the next Budget from ₹50,000 to Rs.1,00,000
- Enhancements to the 80C and 80D deduction limits: After almost ten years, the Section 80C deduction limit could increase from the current threshold of ₹1.5 lakhs to ₹2.5 lakhs, which might encourage people to invest in government-sponsored programmes like National Savings Certificates, Public Provident Funds, and LIC and help the nation’s infrastructure development. Due to excessive medical bills and hospitalization charges, the government may also think about increasing the Section 80D deduction limitations from ₹25,000/ ₹50,000 to ₹50,000/ ₹1 lakhs, respectively.
- Reduced Surcharge Rate: For persons earning more than ₹5 crores, the tax is increased to 42.744% by the surcharge rate of 37%. The government may want to rationalize and reevaluate the fee rates at this point.
- Improvement of other deductions: Deductions like 80EEA (interest on a housing loan) and 80EEB (a loan for an electric car) that are due to expire this year might get a two-year extension.
- Reviewing the Child Education and Hostel Allowance: For more than 20 years, the amounts have stayed the same, at ₹100 and ₹300 per kid per month, respectively. The government may think about raising the caps to ₹1,000 and ₹3,000 per child each month, respectively, given the present price of a child’s education.
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Salaried Individuals Major 2023-24 Budget Highlights
Around nine years ago, per capita income, was less than half of what it is now, standing at ₹1.97 lakhs. During this period, the Indian economy has jumped from being the 10th largest in the world to the 5th largest. The EPFO membership has more than doubled, reaching a count of 27 crores. The year 2022 saw an impressive number of digital payments made through UPI, standing at ₹126 lakh crore for over 7,400 crore transactions. The Swachh Bharat Mission has led to the construction of 11.7 crore household toilets, while the Ujjwala scheme provided 9.6 crore LPG connections. The Covid vaccination drive has covered 102 crore persons with 220 crore doses administered. The PM Jan Dhan scheme has led to the opening of 47.8 crore bank accounts, and PM Suraksha Bima and PM Jeevan Jyoti Yojana have provided insurance cover for 44.6 crore individuals. Under the PM Kisan Samman Nidhi scheme, cash transfers of ₹2.2 lakh crore were made to over 11.4 crore farmers.
Tax Slabs 2023-24 for Salaried Individuals
New Tax Rates
| Total Income (Rs) | Rate (percent) |
| Up to 3,00,000 | Nil |
| From 3,00,001 to 6,00,000 | 5 |
| From 6,00,001 to 9,00,000 | 10 |
| From 9,00,001 to 12,00,000 | 15 |
| From 12,00,001 to 15,00,000 | 20 |
| Above 15,00,000 | 30 |
Conclusion
In conclusion, salaried individuals have high expectations from the Union Budget 2023 in terms of tax relief, increased standard deduction limit, higher deduction limits under Sections 80C and 80D, and revisiting the surcharge rate. They also hope for revisions in the Child Education and Hostel Allowance and other deductions. However, it is important to remember that these are just expectations, and the final budget may differ. Ultimately, the government’s focus will be on balancing economic growth with fiscal discipline while keeping in mind the larger interests of the nation. Salaried individuals should keep themselves informed and seek professional advice to optimize their finances and tax planning based on the new budget’s provisions.
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FAQs on Salaried Individuals and Budget Expectations
How do salaried individuals calculate their income tax liability?
Calculating income tax liability involves determining your total income, subtracting applicable deductions, exemptions, and allowances, and then applying the tax slabs to arrive at the final tax amount. Key factors include income sources, investments, and eligible deductions.
What is the process of filing income tax returns for salaried individuals?
Salaried individuals can file their income tax returns by registering on the official tax portal, selecting the relevant form, and providing accurate income details, deductions, and exemptions. After validation, the return can be submitted online. It's essential to keep supporting documents for verification.
What is the basic process for calculating income tax for salaried individuals?
The basic process involves summing up all sources of income, subtracting eligible deductions like HRA, standard deduction, and investments under Section 80C, and arriving at the taxable income. This income is then taxed according to the applicable income tax slabs.
What are the various components of a salaried individual's income that are taxable?
Taxable components include basic salary, allowances, bonuses, and profits in lieu of salary. Other perks like rent-free accommodation, ESOPs, and certain allowances might also be taxable, based on specific conditions and exemptions.
What are the standard deductions and exemptions available to salaried individuals?
Salaried individuals can benefit from standard deductions on their gross salary, which is a fixed amount subtracted before calculating taxable income. Additionally, exemptions under Section 10 allow for benefits like House Rent Allowance (HRA), Leave Travel Allowance (LTA), and medical reimbursements to be claimed under certain conditions
