Union Budget 2023-24: Will the GoI go all out to please the salaried class in terms of relaxed tax slabs & increased deductions?

From common households to corporate boardrooms; it’s that time of the year when financial hope springs eternal. From economic reforms to tax relaxations, to taxable brackets every part of the budget affects the tax paying citizens. But the budget wish-list and the budget expectations are two completely different things.

However, given the fact that it’s a politically crucial year for the government, the Budget 2023 is likely to be the one that augments economic growth of the nation and make life easier for a taxpayer.

What’s likely to continue…

Like the past couple of budgets, there might be changes for the salaried class in terms of increased standard deductions. However, the limit for deduction under Section 80C of the Income Tax Act, 1961 has been capped at Rs 1.5 lakh and this hasn’t changed since FY 2014-15.

There is both expectation and hope that the standard deduction might be increased to further encourage long-term savings such as PPS, NPS and fixed deposits financing long term infrastructure projects in the country.

What the common man expects?

In one of its report detailing the expectations from Union Budget 2023, Ernst and Young says that to increase adoption of the new Income Tax Regime, slab rates should be revised. It proposes and expects a new Concessional Income Tax Regime under which the tax slabs are revised wherein up to Rs 5 lakh are not taxed. Moving on, the 30% income tax slab rate should apply only from Rs 20 lakh onwards instead of the Rs 15 lakh. It also says that benefits of deductions under Section 80C/CC/CCD/D should be provided upto Rs 2.5 lakh.

Fiscal deficit to drop?

While not foreseeable in the immediate future but a common man is affected infinitely by the nation’s fiscal deficit. From unemployment to low economic growth rate, lower investments, lesser development, higher interest rates are all a part of the vicious cycle of an economy not doing well. Having peaked at 9.2% in the Covid-affected FY ’21, GoI’s fiscal deficit to GDP ratio fell to 6.7% in the FY’22. This figure is expected to fall further to 6.4% in FY’23.

Tax revenues on the rise

GOI lost significantly in terms of tax revenues in FY 20 & 21. However, the Centre’s gross tax revenues increased by nearly 34% in FY 22. Similar strong growth is also projected in FY ’23. There are reports of tax collections for the current financial year exceeding Rs 4 lakh crores in comparison to the budget estimates.

Corporates and boardrooms

Corporates always have a wishlist of their own but even the arm twisting industry giants may have to settle for less as government may not give in to the pressure to reduce taxes on cigarettes. Industry body FICCI has called for reduced taxes on cigarettes from the upcoming Union Budget 2023-24.

On the other hand, some believe that rural development, social schemes will be a priority in the current budget. In a recent report on the budget, finance research company Prabhudas Lilladher said that the government is likely to have renewed focus on rural development, credit availability, MNREGA, food security, higher education etc.

The need for social security

If India is to complete with developed nations and world economies, then there needs to be a much greater emphasis for social security. And that needs to reflect in the budget. With the World Bank recently revising India’s Gross Domestic Product growth forecast to 6.9 per cent for 2022-23, should help the Centre with confidence required to dole out something for everyone.

As this will be the last full budget before the impending 2024 Lok Sabha elections, common tax paying citizens expects a lot of goodies from the government looking at making brownie points.