FM Nirmala Sitharaman has not announced any changes in income tax slabs for 2022-23 or the lowering of tax rates so far. Income tax relief, possible standard deduction revision to account for more work for home expenses, higher limits for investments under Chapter VI-A (Section 80C, Section 80D) were being watched closely. The tax deduction limit for state govt employees to NPS raised from 10% to 14%, propose to increase tax deduction limit to 14% on employers contribution to NPS account of state govt employees said FM. To provide an opportunity to correct an error, taxpayers can now file an updated return within 2 years from the relevant assessment year, she further added. Surcharge on Corporate tax pruned from 12% to 7%, she said.
What were the expectations?
India’s salaried class was expecting from the Union Budget 2022-23 some announcements that will provide much-needed relief. According to a pre-Budget survey by KPMG, most individual taxpayers expected an enhancement in the basic income tax exemption limit of Rs 2.5 lakh. They also sought an upward revision in the top income slab of Rs 10 lakh and an increase in the existing section 80C deduction limit of Rs 1.5 lakh.
According to the survey, 36% of respondents wanted the government to enhance the 80C deduction limit of Rs 1.5 lakh while 29% expect the income tax limit of Rs 10 lakh at which the maximum marginal rate of 30% tax is triggered to be enhanced. In all, 19% of respondents were hoping for an increase in the standard deduction limit of Rs 50,000 for the salaried classes.
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Income tax-payers demanded an enhanced tax limit because there has been a sharp rise in inflation and household expenses such as electricity and medical expenses. Consumers and salaried employees were also expecting some tax-related benefits.
Nirmala Sitharaman introduced a new tax regime in budget 2020. Under the new tax regime, the tax rates are reduced for those willing to forego tax exemptions and deductions. The new tax regime remains optional for taxpayers. This means a taxpayer has the option to either stick to the old regime or choose the new one. Currently, income up to Rs 2.5 is exempt from taxation under both regimes. Income between Rs 2.5 to Rs 5 lakh is taxed at the rate of 5% under the old as well as the new tax regime.
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Personal income from Rs 5 lakh to Rs 7.5 lakh is taxed at a rate of 20% under the old regime, while under the new regime the tax rate stands at 10 %. Income between Rs 7.5 lakh to Rs 10 lakh is taxed at a rate of 20% in the old regime, while in the new regime the tax rate stands at 15%.
In the Budget 2020-21, around 70 exemptions and deductions of different nature were removed. The finance minister had announced that the “remaining exemptions and deductions will be reviewed and rationalised in the coming years with a view to further simplifying the tax system and lowering the tax rate.”
In the 2021-22 Budget the finance minister did not make any significant change in the income tax rates or slabs.