Budget 2023 has done something substantial for the middle class that has been chafing at the bit awhile, over the lack of any sizeable reduction in its income-tax burden.
In the assessment year 2023-’24 i.e., for financial year 2023-’24, those with an income of up to Rs 7 lakh need not pay any income tax. This is up Rs 2 lakh from the earlier slab of Rs 5 lakh being insulated from tax. For those with income in excess of Rs 7 lakh too, there is relief, with the tax-free threshold going up to Rs 3 lakh, from the previous Rs 2.5 lakh. The tax rates for income in excess of Rs 3 lakh have been cut and successive slab progressions are less steep. For AY 2022-’23, the rates were 5 per cent on income between Rs 2.50 lakh and Rs 5 lakh, 20 per cent on income between Rs 5 lakh and Rs 10 lakh and 30 per cent on income in excess of Rs 10 lakh. In AY 2023-’24, it is going to be less steep. Tax on Rs 0-3 lakh income is nil. Incomes between Rs 3 lakh and up to Rs 6 lakh will be taxed at 5 per cent; income between Rs 6 lakh and up to Rs 9 lakh will be taxed at 10 per cent; income between Rs 9 lakh and Rs 12 lakh, will be taxed at 15 per cent; income between Rs 12 lakh and up to Rs 15 lakh will be taxed at 20 per cent, whle income above Rs 15 lakh will be taxed at 30 per cent.
The UK provides for an index-based tax-free threshold, which automatically increases in sympathy with inflation. In India, it remains static until the government bestirs. Bestirred it has, at last.
Senior citizens too have reasons to rejoice. They will, of course, partake in the new, softer regime. In addition, the caps on investments in their pet schemes i.e., senior citizens’ savings scheme (SCSS) and post office monthly income (MIS), have been liberalised substantially. Under the SCSS, as it is, one can invest a maximum of Rs 15 lakh ; now, this maximum is up to Rs 30 lakh . Under the MIS, it was Rs 4.5 lakh in individual accounts and Rs 9 lakh in joint accounts. Now these limits stand increased to Rs 9 lakh and Rs 15 lakh respectively. No need for seniors to flirt with risky schemes in the autumn of their lives.
Presumptive tax schemes
Presumptive tax schemes have been liberalized, to make businessmen cough up at least something. At present, small traders with annual turnover up to Rs 2 crore can opt for the scheme under which they are deemed to have earned just 8 per cent of their turnover as profits, which is deemed to be just 6 per cent, to the extent the turnover is accounted for through banking channels.
It is common knowledge that in India, the last-mile profit or retail profit is the highest - guesstimated at 30 per cent on average. So, instead of paying tax on 30 per cent, participants in the presumptive tax schemes get away with just a slap on their wrists—taxed only on six or eight per cent of their turnovers. This Budget is baiting them further—they can participate so long as their turnover doesn’t exceed Rs 3 crore, up by a whole crore from the existing cap of Rs 2 crore. For professionals too, there is a scheme. If their annual gross receipts do not exceed Rs 50 lakh , their profits are deemed to be just 50 per cent of it. Now, this cap of Rs 50 lakh has been hiked to Rs 75 lakh .
It is human nature to compare. The salaried class has always resented the preferential tax treatment meted out to the capital market. Short-term capital gains from bourses are taxable at 15 per cent and long-term gains in excess of Rs 1 lakh at 10 per cent. The coddling of the capital market continues unabated. It is, however, heartening to see some steps being taken on exemption to housing- oriented capital gains. As it is, under section 54, if one sells their long-term residential home and rolls over the gains into another house, the entire gain is tax-free. Under 54F, if a person earns long-term gains from the sale of assets other than a residential house and rolls over the entire proceeds into another residence, again, the entire gain is tax-free. Budget 2023 caps these twin exemptions at Rs 10 crore. This is good because often, the wealthy book enormous capital gains from their old properties and plough them back in modern apartments. Now they will have to pay tax on gains in excess of Rs 10 crore. The government ought to have limited such exemptions to once in a lifetime. As it is, there are people who enjoy these exemptions annually with gay abandon.
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