Rishu Kawatra
On the fine and gorgeous morning of February 1, 2023 Finance Minister Nirmala Sitharaman rose in the Parliament and presented the last full-fledged Union Budget of the Modi Government before the 2024 Lok Sabha elections with the following quote:-
“This is the first budget in Amrit Kaal, this budget hopes to build on the foundation laid in previous budget and the blueprint laid for India@100, we envision a prosperous and inclusive India in which the fruits of development reach all.” “The world has recognized India as a bright star, our growth for current year is estimated at 7.0 percent, this is the highest among all major economies, in spite of massive global slowdown caused by pandemic and the war.”
The Budget 2023,which has a greater emphasis on the rural sector, social sector schemes, infrastructure creation, and the middle class, keeping its focus on expanding Capex and showing that the Modi Government’s priorities are building roads, highways, and railway lines.
Though it’s been the governments impetus to simplify both the direct and indirect tax structures and it has been working efficiently on these lines as reflected in the various proposals of the budget, some ambiguities still exist and some continue to erupt which are a part and parcel of the legal taxation system and its resolutions being a continuous process . The Budget seems to attract and enhance the common taxpayers’ sentiments by providing numerous tax benefits.
The Budget aims to provide tax benefits to hard-working Middle class by making numerous changes to tax rates impacting taxpayers at the lowest and the highest tax rates, under the new tax regime.
Budget 2020 introduced a simplified personal tax regime, called the ” New Regime ” with effect from assessment year 2020-2021 with the objective of providing relief to taxpayers and simplifying the Income-tax law and an option to choose amongst one of the two schemes . However, since the savings under the new regime of taxation were not significant, there were not many takers for the scheme. The government has now ,in Budget 2023 ,proposed a revamp of the scheme to make it more attractive by increasing the basic exemption limit under this scheme from Rs 2.5 lakh to Rs 3 lakh, allowing higher rebate of Rs 25,000 for low taxpayers (as compared to Rs 12,500 under the regular regime), allowing taxpayers to claim the standard deduction from their taxable salary up to Rs 50,000 and restricting the surcharge for high taxpayers. The standard deduction was not available earlier in the new regime of Tax. The government has proposed to increase income tax rebate limit from Rs 5 lakh to Rs 7 lakh in the new tax regime. Consequently, for salaried class, income upto Rs 7.5 Lakhs will be tax free after claiming a standard deduction of Rs 50K under section 16.
Finance Minister Nirmala Sitharaman has sought to incentivise a shift towards this new income tax regime. However, no change has been proposed in the tax rates under the existing (OLD) tax regime.
The revised income tax slabs of the new tax regime that was announced in Budget 2023 has shifted a break-even point between the old tax regime and the revised new income tax slabs for the salaried, senior citizens and super senior citizens. The break-even point here refers to the maximum deduction one must claim in the old tax regime so that the income tax payable in both the regimes are the same. This can help a person decide which tax regime will be better if they are unable to meet a certain level of deduction. As per rough calculations if the maximum exemptions and deductions claimed by salaried individuals is more than Rs.4.25 lakh for an income above Rs.15.5 lakh, then he/she may pay less tax in the old tax regime from April 1, 2023. So it is for the intelligent individual to do the labour before selecting the scheme , more specifically the regime, in which he opts to file his return of Income. However, it may be reiterated new tax regime will become the default tax regime and if a taxpayer wishes to file his return of income in the old regime, he will first have to exercise the said option on the Tax portal. And for the Business class, such exercise of option can be done only once in life time. So it is advised to be careful and prudent while deciding this and evaluating the pros and cons. Similarly, if a salaried class taxpayer wishes to file his return in the old scheme he will have to first exercise this option on the tax portal but he is free to revert to any scheme in the next filing period , which is restricted in case of Business class taxpayers as mentioned above.
Currently, homebuyers can claim an income tax deduction on the interest paid on their home loan under Section 24 (b) of the Income-tax Act, 1961. The maximum amount of deduction that can be claimed is Rs 2 lakh per financial year for a self-occupied property. Homebuyers can also claim income tax deductions on the principal repayment of their home loan under Section 80C of the Income Tax Act. The maximum amount of deduction that can be claimed is Rs 1.5 lakh per financial year. However, various deductions for other investments such as Public Provident Fund (PPF), equity-linked savings schemes (ELSS), life insurance premiums, and Sukanya Samriddhi Scheme are clubbed under Section 80C of the Income-tax Act, 1961. There is no proposed change in the above limits contrary to expectations. However, one significant change is that if interest has been claimed as deduction under section 24 as above, the same cannot be claimed again as part of the cost of acquisition of the property for the purpose of calculating capital gains on sale of the said property .
Also currently, sections 54 and 54F of the Income tax act allow an individual to claim deduction from capital gains by investing the proceeds of the capital gains consequent to sale of a property in new residential house withing the prescribed period. The legislature has proposed a cap of Rs. 10 crores by restricting the capital gain deduction under sections 54 and 54F of the Income-tax Act (the Act) to Rs.10 crores after stating that “The primary objective of the sections 54 and section 54F of the Act was to mitigate the acute shortage of housing, and to give impetus to house building activity. However, it has been observed that claims of huge deductions by high-net-worth .assesses are being made under these provisions, by purchasing very expensive residential houses.” The primary motive of this proposition is to tax the rich.
For those friends who love foreign vacations, the Legislature has tightened its noose. The finance bill 2020 proposed an amendment to section 206C to levy 5% TCS on overseas remittance and for sale of overseas tour packages. To make it spicy the rate of TCS ( tax collection at source ) on overseas tour packages and select other cases has been proposed to be increased from 5% to 20% in the Budget 2023.
To encourage the agniveers, Individuals enrolled in the Agnipath Scheme and subscribing to the Agniveer Corpus Fund shall get a deduction of the Government contribution to their Seva Nidhi under the new tax regime. Sum received from the Agniveer Corpus Fund by a person enrolled under the
Agnipath Scheme 2022 shall be exempt from tax under Section 10(12C). Deductions for contributions made to the Agniveer Corpus Fund shall be allowed under Section 80CCH in both existing and new tax regimes.
In a significant change, Receipts from life insurance policies issued on or after 01-04-2023 shall be taxed as income from other sources, if the premium paid is above Rs. 5,00,000 in a year.
A proposal to introduce a common Income tax return form , removal of anomalies and lacunae in various provisions of Income tax and GST Acts and an endeavour to simplify the filing systems of the Income tax and GST returns are amongst the various endeavours of the legislature to brandish its taxpayer friendly approach.
And as quoted by Late FM Arun Jaitley in his budget speech of 2015-16 :-
“Kuchh to gul khilaye hain, kuch habhi khilaane hain, Par baaghmein ab bhi kaante kuchh puraane hain”
(We have made a few flowers bloom and have to bloom more, but there are a few old thorns in the garden.)
There is a big way to go for the government to meet the expectations of the common man and to correct the incongruities & aberrations and the budget a continuous and a never ending procedure and mechanism for its actualization.
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