The budget plays an important role in the lives of the “salaried class” community in India, any change in the Revenue or Expense side of the budget has a direct impact on their daily lives. Since there is applicability of tax deduction at source from the earnings of this community, the expectation from the budget always remains for tax saving opportunities on one hand and getting benefits in lieu of tax payments on the other.
One must appreciate the fact that India is on a growth trajectory and needs all possible resources to fuel this growth hence the budget must balance between avenues to increase tax collection and promote avenues to gather low cost funds from the taxable community for medium to long term period against which tax benefits may be offered. This could be a mutual win strategy.
The budget could explore the following considerations for the salaried community:
The most common ask from the salaried class would be to increase the basic exemption slab to at least Rs.5 lacs. The budget could explore a mandate to invest Rs.15000/- in medium term tax saving investment option to avail this higher exemption slab. The tax rates could be simplified, for example, it could be 10%, 20%, 30% with a maximum cap at 30% along with elimination of surcharge and cess. It would also be good if there is one tax structure instead of the old & new tax regime.
Section 80C plays an important role for the salaried class as it offers tax savings against investments. The budget could explore increasing the 80C limits to at least Rs.15 lacs along with creating secure medium to long term investment options where the principal is exempt from tax in the year of investment and interest is exempt in the year of redemption. The rates offered could be lower than bank rate of interest hence a source of low cost funds for the Government.
There is a need to revive real estate as an investment class hence it would be helpful if the limits on housing loan interest u/s 24 is increased or opened up. The budget could reinstate the older system of no interest amount limit in case of let out/deemed to be let out property.
LTA could be made eligible for tax benefit every financial year instead of twice in a block of four years and cover expenses incurred on stay, local travel and entertainment expenses against valid proof of expense rather than restrict it to travel expenses alone. Overseas travel may also be considered for inclusion in LTA.
In the last decade medical expenses and health insurance premiums have been increasing significantly year on year hence sec 80D limits could be increased to at least Rs.2 lacs irrespective of age categorization.
Sec. 80E for education loan could be revisited to cover larger scope of education related expenses for Institutions in India and overseas.
Children Education allowance (CEA) limits could be revisited as there has not been any major change since 2014 in this allowance.
The Government has been promoting expansion by Corporates hence migration of workforce beyond the four metros has resulted in increase of cost of living especially rental costs increasing in these cities eg; Bengaluru, Hyderabad, Pune. The budget 2023 could look at expanding the definition of metro cities in India.
The budget could explore introducing a taxpayer identification method and offering the benefits/privileges to the salaried class such as additional discounts on interest rates on loans from banks and financial institutions, additional interest rates on fixed deposits and other fixed term investments, discounts in insurance policies – life, health, general, special concessions in Rail, Air, Bus travel fares, concessions in fees paid to educational institutions, concessions in medical expenditure above certain limits even after retirement from service, lower GST rates on good and services purchases.
Mahesh Krishnamoorthy is the Managing Director of Core Integra. He can be reached on LinkedIn here.