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Business News/ Money / Personal Finance/  Budget 2023: Income Tax changes announced; Is this the beginning of an end for 80C, 80D exemptions?
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Budget 2023: Income Tax changes announced; Is this the beginning of an end for 80C, 80D exemptions?

As the new income tax regime becomes the default scheme, tax payers would gradually move towards the habit of lower savings, believe tax and wealth management experts.

Those will an income of Rs 15 lakh will be made to pay a tax of Rs 1.5 lakh Premium
Those will an income of Rs 15 lakh will be made to pay a tax of Rs 1.5 lakh

As the new income tax regime becomes the default scheme, tax payers would gradually move towards the culture of spending more and saving less, believe tax and wealth management experts.

The Union Finance Minister Nirmala Sitharaman, during her budget 2023 speech, announced the new tax slabs that promise to leave more money in the hands of tax payers.

For the unversed, there are two tax regime in force. The first one has higher tax rates but one is entitled to claim tax exemptions by making investments such as those allowed under section 80C.

On the other hand, the new regime (in which the tax slabs have been changed) enables tax payers to pay taxes at lower rates but sans tax exemptions.

Chartered Accountant Kanan Bahl, growth consultant for fintech firms and AMCs, says that the debate between new and old tax regime gets real now.

Sharan from 'Finance with Sharan' explains that the new regime is now attractive over the old one even if you are claiming 80C deduction.

CA Bahl tweeted this after the Budget announcement.
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CA Bahl tweeted this after the Budget announcement.

“If you are earning up to Rs 10 lakh, new tax regime becomes attractive even if you are exhausting 80C deduction. However, if you are availing multiple deductions like HRA, Housing loan interest etc., then a well-thought calculation should be made," says Sharan from 'Finance with Sharan'.

In other words, investors will now have less incentive to invest in the tax-saving investment schemes.

These are the latest tax rates now:

Income                                  Tax rate
Rs 3 lakh- Rs 6 lakh               5%
Rs 6 lakh-Rs 9 lakh                10%
Rs 9 lakh-Rs 12 lakh          15%
Rs 12 lakh- Rs 15 lakh        20%
Over Rs 15 lakh                  30%

Mumbai-based Chartered accountant Chirag Chauhan, says that the latest changes are good for those who are not claiming exemption. Rather than seeing it as a way to dissuade investors from investing in the tax-friendly schemes, investors can now invest wherever they want.

“With this, they will earn more by investing in the mutual funds i.e., 10-12 percent and will also have liquidity without any lock-in period of 3 years. But there is no denying the fact that the saving culture will reduce," says Chauhan.

CA Chauhan tweeted this after the Budget was announced on Wednesday.
View Full Image
CA Chauhan tweeted this after the Budget was announced on Wednesday.

S Sridharan, Founder of Wealth Ladder Direct, also echoes the same sentiments: “The new tax regime discourages the saving habits of individuals. Since the take-home income of tax payers will now increase, it will adversely impact the saving habit of tax-payers. Also, since financial illiteracy is high in India, people will now spend more. Some will start investing more, while others will start spending."

We explain tax saving fixed deposits here.
View Full Image
We explain tax saving fixed deposits here.

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Published: 01 Feb 2023, 03:47 PM IST
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