Union Budget 2023: Personal Taxpayer’s Wishlist

It is a general notion that that every Nation is built by its people. Considering the contribution of the individuals behind the success of the economy, it is expected that the upcoming Budget 2023 should mainly focus on the growth of individual taxpayers in India. Some of the key changes suggested on the personal taxation front are briefed as under:

1. Increase in section 80C limit for investments to Rs. 2 lacs

Section 80C of the IT Act provides a cumulative deduction limit to a bunch of investment-linked tax saving options such as life insurance premium, ELSS, PPF Contribution, senior citizen saving scheme, principal on housing loan, 5 year fixed deposits, Sukanya Samriddhi Yojana, etc. This section also enables individual taxpayers to avail benefit for certain expenditures such as towards children’s tuition fees, principal repayment of home loan, etc. Individual taxpayers are seeking amendment under this section from past 5-7 years as the present limit of Rs. 1,50,000 is very less against the number of investments options and was last revised in Budget 2014.

Thus, to bring the 80C deduction limit on par after factoring the annual inflation, it is suggested to increase the limit of deduction under this section to Rs. 2 lacs. Also, such increase which impacts a significant majority of the taxpayers has been long overdue.

2. Enhancing the limit of deduction and widening the scope in respect of interest on deposits in savings account u/s 80TTA

Section 80TTA of the IT Act, provides deduction to Individuals and HUF’s who derives interest income only from savings bank accounts with banks/ co-operative society/ post office up to Rs. 10,000 p.a. As the existing scope of this section is limited, the same must be expanded in order to cover other types of interest such as interest on bank / post office term deposits, recurring deposit etc. so as to bring more individuals under the ambit of this section.

Moreover, as the threshold limit hasn’t been revised since its introduction by Finance Act 2012, the threshold limit of Rs. 10,000 must be enhanced to Rs. 20,000, considering the inflation in past 10 years.

3. Enhancing the threshold limit for Section 80D and applicability of medical expenditure to be extended to individuals other than Senior citizens 

Section 80D of the IT Act provides deduction for premium paid by an Individual in respect of medical insurance or contribution to Central Government Health Scheme / notified scheme for self, spouse, dependent children or parents. Further as per the present laws, citizens above the age of 60 years (i.e. senior citizens) who are not covered by Health Insurance are allowed deduction of Rs. 50,000 towards actual medical expenditure.

As the scope of such expenditure is restricted only to senior citizens, it is recommended to expand this benefit to other individuals as well. Also, the quantum of deduction under this section should be revised upwards to Rs. 100,000, considering the inflation in the economy. 

4. Increasing the quantum of Deduction in respect of payment of interest u/s 24(b)

Currently, section 24(b) of the IT Act provides for a deduction of Rs. 2,00,000 from the Net Annual Value (NAV) of house property in respect of payment of interest on loan obtained for the purpose of acquisition or construction of the house property. RBI on 7th December raised the Repo Rate for the 4^th time by 35 basis points so as to revise it to 6.25%. This lead to rise in the interest rates as well making the debt more costly for retail borrowers.

Thus, considering the rising inflation, increasing repo rate and other economic indicators, there is a need to increase the interest deduction limit from Rs. 2,00,000 to Rs. 3,00,000.

5. Threshold limit of Gifts received from non-relative under section 56(2)(x) which was last amended in 2006 to be enhanced to Rs.1,50,000/-

In accordance with Section 56(2)(x) of the IT Act, if any person receives any property on or after 1 April 2017, without consideration or for consideration which is less than the aggregate fair market value by an amount exceeding Rs. 50,000, the difference shall be subjected to tax under the head ‘Income from Other Sources’ in the hands of the recipient.

The existing threshold limit of Rs. 50,000 under this section was last revised in the Budget 2006. Thus, considering the inflation and increased cost of living, the threshold limit should be enhanced to Rs. 1,50,000.

6. Increasing the threshold limit of payment of Advance Tax to Rs. 30,000

As per the present provisions of section 208 of the IT Act regarding advance tax, every person whose estimated tax liability for the year is Rs. 10,000 or more is liable to pay advance tax. The said threshold limit of Rs. 10,000 for payment of advance tax was last amended by Finance Act, 2009.

In wake of the increasing inflation in the Indian economy over the last 13 years, there is a need to increase the present threshold limit of Rs. 10,000 to Rs. 30,000. This will help to reduce undue compliance burden for sole proprietors with small business enterprises.

7. Increase in basic exemption limit to Rs.3.50 lacs from the current Rs.2.50 lacs keeping in view inflation and non-revision of basic exemption limit for past several years

Individuals, being slab rate taxpayers, are given a relief of Rs. 2,50,000 in the form of basic slab rate exemption not chargeable to tax. However, such basic exemption limit has not been revised since Union Budget 2014.

Considering the year-on-year increase in inflation and the resulting increase in the cost of living, it is suggested that the should be enhancement of the said limit to Rs. 3,50,000.