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Budget 2023: How Exemption-Less Taxation Will Benefit the Economy

An Overview

Individuals have faced great hardship in recent years due to worldwide war-related catastrophes, layoffs, pandemic scenarios, salary cutbacks, skyrocketing inflation, and increased medical expenses. To add to this, there is already widespread concern among the general public about a worldwide recession. As a result, increasing demand would probably be one of the Indian government's primary objectives.

Given all of this, there is a high likelihood that the Union Budget 2023 will allow for additional net disposable income (particularly for lower and middle-income people) via tax cuts or other means. This would be done in the hope that the extra net disposable income would be used by individuals and families to improve their consumption requirements, hence stimulating demand for products and services across sectors.

While there are a variety of methods that might be examined for this aim, there has been widespread speculation that the government may consider increasing the basic tax exemption limit to enhance disposable incomes, which could aid in the revival of consumption.

The baseline exemption level under both the present and new tax regimes is currently ₹2.5 Lakhs per year. The fundamental reason for such expectations is that, except for introducing a new tax framework, individual tax rates have not been adjusted in a long time.

For those earning more than ₹5 Lakhs (assuming all other factors stay constant), this might result in tax savings ranging from ₹13,000 to ₹17,810 per year, depending on the applicable surcharge rate based on income level. Individuals having an annual income of less than ₹5 Lakhs may be tax-exempt. It will do away with the need to submit a tax return. As a result, it will further the government's aim of making it easier for small taxpayers to comply.

The new optional tax regime (alternative income slabs and lower tax rates) was implemented in Budget 2020, allowing individuals to select between the new tax regime and the previous tax rates. To make the new tax regime more appealing, the finance ministry may consider modifying the slab rates under the new optional tax regime in addition to the planned increase in the basic tax exemption level (to ₹5 Lakhs).

In addition, the subsequent income slabs and the applicable tax rate may be modified as necessary. For example, if the current rate of tax is 5% for taxable income ranging from ₹2.5 Lakhs to ₹5 Lakhs, then the same 5% tax rate may be made applicable for taxable income ranging from ₹5 Lakhs to ₹7.5 Lakhs as a result of the suggested increase in the basic exemption limit.

Related Articles:  What Taxpayers Should Expect From Budget 2023 | Union Budget 2023 India Date and Timings | Will The Long-Term Capital Gains Exemption Limit Go Up | Which Sectors Will Get the Most Benefit From The Budget 2023 | What Budget 2023 Would Mean For The Indian Workforce | Who Will Present the Union Budget 2023

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