1. Enhanced tax slabs
The current tax slabs, which were last amended in the 2017 budget, are expected to be revised to Rs 5 lakhs from the current exemption limit of Rs. 2.5 lakhs. This benefit will also trickle down to those with higher income, thereby providing relief to the middle class and lower middle class. This, if introduced, will be a welcome change since currently, an individual with an income up to Rs. 8 lakhs qualifies for the economically weaker section(EWS) category.
2. Salaried taxpayers
2022-23 has had a hard hit on the pockets of salaried employees due to layoffs, global inflation and hardships caused to them. The government should enhance the standard deduction to Rs. 1,00,000 from the current level of Rs. 50,000 This would increase the disposable income in the hands of taxpayers.
3. Tax-free bank FDs
In recent years, there is a sudden shift in the investment portfolio of the youth from fixed deposits to capital market instruments like mutual funds and shares, which is causing a huge cash crunch for the banks. Tax relief is expected on investments in FDs to make it more lucrative and attract more investors.
4. Simplified capital gains tax
Taxpayers are expecting a less complicated capital gains taxation structure. In 2022, we saw a record increase in the number of Demat accounts opened. The present set of rules involve complex calculations with different tax rates for different asset class Also, the capital gains tax rate depends on the period of holding of the assets, i.e. 12 months, 24 months and 36 months and the class of assets such as listed/unlisted equity shares, debt securities, immovable property or REITs, etc. It is expected that these multiple tenures will be done away with and a uniform tax rule will be introduced.
5. Slash in the surcharge rates
There is a huge buzz regarding the exorbitant surcharge rates, which go up to 37% in case the income exceeds Rs. 5 crores, which is heavy on the taxpayer’s pocket. It is anticipated that the surcharge rate will be reduced.
6. Integrated ITR forms
To ease the compliance burden on taxpayers, the income tax department proposed a draft merging all the existing ITR forms except ITR-7 in November 2022. However, this was a proposed draft. Further clarification is expected in the forthcoming budget.7. Revisiting deductions and exemptions
The Income Tax Act provides tax relief to taxpayers through deductions like 80C, 80D, 80EEA, 80EEB, etc. The government needs to revisit the threshold of these deductions to increase the disposable income in the hands of taxpayers and the consumption level to foster economic growth.
80C is a major deduction claimed by taxpayers which should be enhanced from the current level of Rs. 1,50,000. The benefit of affordable housing and purchasing electric vehicles must also be extended.
8. Taxation of cryptocurrency and online gaming industry
Taxation of cryptocurrency and online gaming still remains a grey area, therefore, a more comprehensive and detailed framework is required. Although a flat tax rate of 30% was imposed on cryptocurrencies in the previous budget, taxpayers are seeking clarification on the valuation, gifting of such assets, the situs of VDAetc. The crypto markets has seen massive crash, and investors may have incurred substantial losses. Unfortunately, the income tax provisions do not allow the offsetting of these losses. Our recommendation is that a one-time relief to carry forward the loss and adjust them against the same crypto category must be allowed capping the maximum carryforward period at 2 years.
9. Renewable energy
In order to leapfrog solar installation in the country and reach the 2030 Solar Mission Target, the government needs to introduce tax incentives to corporations that install solar panel facilities and other taxpayers who install solar rooftop
.
The Union Budget for 2023-24 is expected to prioritise decarbonisation, energy transition, and renewable energy to reflect India’s climate obligations at the COP26 and COP27 conferences.
10 Taxation of tech companies
India has already assumed its presidency in the G20 summit, 2023, from December 1, 2022. The digital economy has gained significance among the G20 member countries in the past. With India’s digital economy growing at such a fast pace, addressing the tax challenges of the digital economy would be a prime concern for the government.
The experts are expecting the government to look into macroeconomic factors like inflation and unemployment to boost the economic growth of the country. This budget will be a ray of hope to the taxpayers, given the post-pandemic repercussions the country is facing.
(The Author is Founder and CEO, ClearTax)
