Last Updated: January 14, 2023, 11:30 IST
Due to the Covid-19 pandemic, skyrocketing inflation, pay cuts, layoffs, as well as rising medical expenses, the past few years have been incredibly difficult for people. In addition, the average man is already very concerned about a possible worldwide recession. Given all of that, there is a great deal of hope that the Union Budget 2023 will increase net disposable income (especially for lower and middle-income earners). This hope may come in the form of tax cuts or another provision.
This may leave people and households with some extra net disposable income to meet or increase their consumption demands, hence pushing demand for goods and services across all industries.
The government may look at raising the basic tax exemption limit to increase disposable incomes, which could aid in reviving consumption. While several options and methods may be taken into consideration for this purpose, there has been widespread speculation about this possibility.
The current basic exemption threshold for both the old and new tax regimes is INR 2.5 lakhs annually. (Residents with taxable income under INR 5 lakhs are eligible for a tax credit of INR 12,500 or equal to the amount of tax owed, whichever is less.)
The fundamental justification for this forecast is the fact that, aside from the implementation of new tax laws, individual tax rates have not altered for a very long period.
Depending on the applicable surcharge rate based on the amount of income, this might result in tax savings ranging from INR 13,000 to INR 17,810 per year for people with incomes over INR 5 lakhs (assumed all else stays the same).
For people whose annual income is equal to or less than INR 5 lakhs, this can be tax neutral. It will do away with the requirement to submit a tax return. It will therefore advance the government’s objective of making compliance simple for small taxpayers.
The new optional tax regime, which includes lower tax rates and various income slabs, was implemented during Budget 2020. Individuals now have the option to select between the new tax regime and the current tax rates (without taking into account any required exemptions or deductions).
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