Budget 2023: Here’s why FM Sitharaman should rejig the Income Tax slabs and exemption limits
Basic income tax exemption limit in India is currently two and a half lakh rupees annually further under the section 87a of the Income Tax Act of 1961 an individual with an annual taxable income of up to five lakh Rupees is eligible for an income tax rebate of 12 and a half thousand rupees this provision is available both under the.
Old and the new income tax regimes which essentially means that individuals with a net taxable income of up to five lakh rupees those individuals are entirely exempt from income tax but experts are now asking the central government to increase the basic exemption limit from Two and a half lakh to five lakh rupees in the upcoming budget they say it’s.
Going to boost consumption it’s going to further push the economy amidst the global slowdown that we’re talking about it will push the economy up feroz azizes as Deputy CEO at anandrati private wealth management he’s joining us on the show along with CA Naveen wadwa he is the DGM at tax man firoz currently this basic income tax exemption like I was.
Telling our viewers that limit is two and a half lakh rupees for individual taxpayers under both the Old and the new income tax for the dreams and under 87a you get uh up to two five lakh rupees that is eligible for an income tax debate of twelve and a half thousand rupees now to ask you directly what changes would you like to see in the.
Basic exemption limit do you think raising the basic limit would give a boost to the economy would that happen yes I I think so become uh for sure uh because what happens is I think seldom does the government have that kind of leeway to make such dramatic changes for example a two and a half lakh limit becoming a five lakh limit uh is a.
Reasonable change especially given the fact that those haven’t changed from 2014.1.2 I think this is the year where there is tax collection significantly more than what’s been anticipated uh the revenue collection which was anticipated uh in the budget which went by last year was 22.1 lakh 1.22.16 lakh grow and I think uh We’ve penetrated significantly.
So much so that there could be three lakh crore or more than the budget uh both on the direct and indirect tax collection so coming back to your question pointed one now will that boost the economy the answer is a big yes I think inflation is not so much of a problem uh in India yeah uh that this could result in an inflation Spike which.
Is a global concern like U.S quite a few people in the pandemic got two thousand three thousand dollars in their bank account straight which boosted the economy to The Other Extreme that inflation became out of hand so that also is not a problem so I think it will definitely boost consumption and I think rural consumption which has suffered.
Immensely after the pandemic is showing initial signs of recovery and this change could uh could catalyze the rural consumption so it seems to be in the doldrums for the last few years do you agree uh with what feroz is saying the real income of thousands of middle class earners has taken a big hit in the last couple of years because of the pandemic.
Because of the subsequent high prices that we’ve been dealing with now the focus of the government is yes on increasing the tax net because they haven’t changed the slabs since 2014 what should according to you the approach of the Finance Minister be when it comes to tax Labs now I do actually as a taxpayer I’ll go with Heroes and I.
Also wish there should be an increase in the elaborate but as a tech professional I see a very less chance of any increasing the tax labs and I have got two three reasons why government is not gonna do it so the number one is the fiscal deficit which is already above 6.4 percent so the government is not in the mood to spend more by reducing the.
Tax rates and basically the government follows the counterfeit legal fiscal policy wherein during the Back Time government increases its spending and during the good time it increases the tax rate so that it can add some additional Revenue to the kitty so because of that reason during the cover time government has already spent a lot.
Of money on the for the economy recovery but I don’t think so comment has got that much of Levy to reduce further the tax rates that’s reason number one reason number two uh since this is the last full budget before the next Journal elections comes in uh as if we see in 2019 uh during the entire budget the government change some tax rates uh the.
Uh 87a relief was increased so so I don’t see much changes this year but definitely I believe that the next wintering budget would have more exciting things to talk about and obviously the government can tweak some tax rates so this is the reason um and and the last one is uh if you look at the budgeted capital expenditure which.
Has already seen a 14 surge in the budget capital expenditure and government would need money for that so they are not going to do a remarkable changes in the tax rates so when you consider the pros and cons that the government would consider feros when it comes to uh changing the tax Labs as it were which I mentioned hasn’t changed in.
2014 at this crucial point in our economy where we stand right now with the after effects of the pandemic with inflation before us you said that’s not too much of a concern right now with all those factors what would the Finance Minister consider when deciding on whether to tweak the tax Labs or not see the fact that you’ve collected 14 lakh.
65 000 crores of taxes 26 percent higher on the direct taxes 27 uh higher on the indirect taxes year on year which is a very good tax collection you’re looking at a penetration on the 22.16 which was the predicted or anticipated Revenue collection we have penetrated uh almost about 58 59 or even more uh which is not the case in normal years so I think.
Today you have the leeway of course fiscal deficit uh is a concern Like Loving Saab said there is a concern but it’s very interesting to see only 47 of the revenue expenditure has happened in seven months generally by the seven months passing uh which is the latest data we had uh you were generally 55 percent penetrated into a into the.
Expenditure budget we are just 46 uh so which means that there is fiscal Prudence of course with the kind of government spending uh your deficits are going to be higher and that’s what a country like ours should do invest in infrastructure and have negative uh negative or a physical deficit situation and I think that’s uh not very normal uh.
For a growth economy like ours I think today we have the leeway that’s point one and I think the Finance Minister will take it seriously the second I think the Finance Minister should take very seriously is the flight of uh hnis moving from India outside the estimate is about nine lakh people have moved out because of the taxation especially the.
Surcharge which is 37 which makes income tax or even tax on short-term capital gains to 42.744 now there are quite a few people are taking uh citizenships in Dubai and Singapore where the Dual taxation treaty exempt them from paying taxes on several uh immovable property in India so I think that is that is creating a lot of tax losses I’m sure uh.
Like nirmala uh had said when she brought the search artists she will reconsider it in the 75th year of Independence the surcharge I hope she revisits that as per the subtle uh mention during the launch of the surcharge well that is the Hope but Mr vadwa when you consider the old regime it allows tax saving benefits under.
Section 80c 80d 24 and so on which is still available as an option for taxpayers now as far as exemptions and tax saving benefits go what’s your stand what are you expecting on these fronts from the budget this time yeah so that’s one area where I am quite confident because the government should make some changes and could make some changes this.
Regime was introduced around two years back and uh around more than a dozen deduction and exemptions were withdrawn if you want to go with the new region and in spite of that they are not much takers of the new regime and then the answer is very simple because of certain deductions common deductions and exemptions as a individual taxpayer I.
Generally claim and being a resident person I generally claim so basically these are my contribution to insurance policies my children education fees my repayment of housing loans the standard deductions all these deductions and assumptions are not available in the new tax regime and they’re just 10 or 12 takers of the new region and that too.
From the non-residents so because they don’t have much of these deductions and exemptions to claim in India so basically they are the more beneficiary so if government is really Keen in simplifying the tax structure because the current tax structure is very very complex as an individual taxpayer not from the tax background it becomes very.
Difficult for any taxpayer to understand these complex web of reduction or exemption because of that a committee a few years back has also recommended to remove all this deduction exemption but it was not possible to do away overnight so that’s why the government is trying to removing the deduction exemption in Phase manner.
So the first phase was introduced by the new text region and the government if really want people to come in to the new region they should either reduce a tax rate the higher tax rate is still 30 percent so that tax rate should apply at least when the income exists 20 lakh rupees the current limit is 15 lakh rupees that’s number one number two is.
Allow at least 80c deduction uh because it will help India to penetrate more uh Indian people to penetrate you know take more and more insurances So currently the penetration rate is around 2.9 percent of life insurance policies so if the government reconsider this decision to allow ATC reduction at least for insurance policies and medical insurance.
Policies that is ATD then I believe it would be uh you know an attractive regime to offer