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As the world ushers into the new year, Indians will be keenly waiting to see what the government has in store for them in the upcoming Union Budget 2023. From the industry stakeholders to the salaried class, everyone will be looking at the Modi government’s Budget with high hopes.

The fact that Union Budget 2023 is the last full-year budget of the BJP-led government makes it different from its predecessors. Hence, there are expectations that the Centre will bring something big for the people. Some experts say budget this year can bring changes in the current income tax slabs as well.

As of now, income tax is deducted under four slabs set by the government under the Income Tax Act. These tax slabs depend on factors such as age, income levels, tax residency status of the taxpayer, etc.

Before the Budget is announced, here is a lowdown of the current structure under the old Income Tax regime:

Income tax slabs for individual adults

 

Income Below 2.5 lakh: They are not eligible for any income tax deduction under the existing law.

Income Between 2.5 lakh and 5 lakh: Individuals have to pay 5% tax on income that is more than 2.5 lakh.

Income Between 5 lakh and 10 lakh: Individuals earning under this slab have to pay 20% tax on their income.

Income Above 10 lakh: Those earning above 10 lakh have to pay 30% tax.

Income tax for individuals above 60 years of age

 

Income Up to 3 lakh: Senior citizens with an income up to this mark are exempted from all kinds of taxes.

Income Between 3 lakh and 5 lakhs: The income of senior citizens under this slab is taxed at a rate of 5%. The tax is imposed on the amount of income that exceeds 3 lakh limit.

Income Between 5 lakh and 10 lakh: Income under this category is taxed at a 20% rate. Tax is imposed on income that is more than 10 lakh.

Income Above 10 lakh: 30 % tax is imposed on income above 10 lakh.

Income tax slab for super senior citizens ( 80 years and above)

 

Income Up to 5 lakh: Individuals who are earning up to 5 lakh are exempted from tax

Income Between 5 lakh and 10 lakh: Those who are earning more than 5 lakh and less than 10 lakh have to pay 20% of their income.

Above 10 lakh: Super senior citizen individuals who are earning more than 10 lakh of annual income are subjected to 30 % tax on their total income.

Deduction and exemption

 

The existing tax regime provides space for the salaried class to save money by using certain standard deductions and exemptions. The following are the ones that are provided under the old tax regime.

Standard Deduction

Standard deduction of a certain sum, ie 50,000, applies to every salaried individual. However, the sum can be claimed against the salary income without any conditions.

HRA exemption

Referred to as House Rent Allowance, this exemption is useful for individuals living on rent to reap some tax benefits. These benefits can be used only after submitting authentic rent receipts. It can be claimed as exempt to the lower of actual HRA, 50%/ 40% of salary, annual rent amount lesser than 10% of salary.

Section 80C

This deduction can be availed for those who are investing in particular combinations of savings/investment options. Deduction under section 80C is restricted to 1,50,000. It can be availed against any of the following investment options:

-Public Provident Fund(PPF)

-National Saving Certificate(NSC)

-5-year term deposit with banks

-Life Insurance Corporation (LIC) premiums, Employers Provident Fund(EPF)

-Equity Linked Savings Scheme(ELS)

-Unit Linked Insurance Premiums(ULIP)

Section 80 D

Individuals who have opted for health insurance are allowed to get tax benefits under section 80 D. They can avail of the benefit of insurance premiums for themselves and family by submitting authentic proof of information.

New Tax Regime

Taxpayers also have the option to opt for the new tax regime implemented in the beginning of current financial year. However, they don’t have any option of claiming any deductions and exemptions. The new tax regime comes with a completely different set of tax slabs for individuals based on factors like age, gender, income, etc. As of now, it completely depends upon the taxpayers to opt for any of the tax regimes.

What can taxpayers expect from Budget 2023 ?

The central government can make certain changes in the tax slabs of the old income tax regime and increase the threshold limit for the higher tax income from 10 lakh to 20 lakh, believes Delloite India. It has also suggested that the government can reduce the tax rate from 30 per cent to 25 per cent.

For investments under Section 80C - "The current limit of 1,50,000 seems quite low. With the increase in the cost of living and inflation, the government should look at increasing the limit. This will have two-fold benefits, viz., individual taxpayers would be willing to save more and will benefit from a lower tax outgo, thereby increasing disposable income to meet the increase in the price of various commodities," Tapati Ghose, Partner, Delloite India said in a report.

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