Income Tax Budget 2023 Standard Deduction: The year 2023 has started. Now everyone’s hopes are pinned on the coming budget this year. The Finance Minister can make 6 announcements this year for tax payers. We are going to tell you about this.
The government is likely to increase the annual basic exemption limit from the current Rs 2.5 lakh to Rs 5 lakh under both the old and the new tax regime in the coming budget. The current annual basic exemption limit of Rs 2.5 lakh (under both old and new tax regime) for tax payers below 60 years of age remains the same from FY 2014-15. This limit may be reconsidered considering several factors like rise in cost of living, inflation, number of taxpayers required to file income tax returns, tax revenue foregone by the government etc.
From the financial year 2014-15, the deduction limit under section 80C of the Income Tax Act, 1961 (Act) has been capped at Rs 1.5 lakh. Most of the deductions under Section 80C encourage taxpayers to invest in long-term savings such as Public Provident Fund (PPF), National Pension System (NPS) and fixed deposits which provide long-term finance for infrastructure projects in the country. does. Apart from this, the taxpayer spends the amount required to repay the home loan, insurance for self and dependents and children’s education. Therefore, it is an expectation that the deduction limit may be increased from Rs.1.5 lakh to Rs.3 lakh.
Tax-free medical reimbursement and traveling allowance exemption was withdrawn by applying standard deduction from the financial year 2018-19. Since then, while the amount of the deduction has remained constant, medical expenses and fuel costs have increased. Thus, there is a mater to consider increasing the standard deduction from the existing limit of Rs.50,000 to Rs.1 lakh.
Currently, the deduction limit for health insurance premium is Rs 25,000, including checkup for self, spouse and children, and Rs 50,000 for parents of whom at least one is a senior citizen. Considering that there has been an increase in the cost of hospitalization and medical expenses, these limits may be raised to Rs.50,000 and Rs.1 lakh respectively.
Child Education Allowance is currently exempt to the extent of Rs 100 and Rs 300 per child per month (up to a maximum of two children) for children’s education and hostel expenses respectively. This amount of exemption was fixed about two decades ago. Therefore, in view of the increase in the cost of education in recent times, there is a possibility of capping these exemptions to at least Rs 1,000 and Rs 3,000 per child per month respectively.
The deduction for interest on home loan is currently Rs 2 lakh. With interest rates rising and the deduction available for housing interest being capped at Rs 2 lakh, home loan buyers face a challenge in terms of non-tax deductible interest expense. Keeping the same in mind, this deduction can be increased from the existing limit of Rs 2 lakh to Rs 5 lakh. Also, this deduction (interest on home loan on own property) is not allowed under the new tax regime. Given that buying a home is a long-term financial commitment, it can also be assessed for providing this deduction under the new tax regime.