Due to which now those having an annual income of seven lakh rupees will not have to pay any tax. However, this can be possible due to the rebate given by the government. This exemption is available under Section 87A of the Income Tax Act. In 2013-2014, tax rebate was introduced under Section 87A through the Government of India. Presenting the Union Budget 2023-24 on February 1, 2023, Finance Minister Nirmala Sitharaman has announced a change in this income tax exemption under the new income tax regime. Let’s know about it…

What is Income Tax Rebate?

Simply put, income tax rebate is a form of refund on your income. The Income Tax (IT) Department provides this refund or exemption under certain circumstances. Taxpayers are liable to get income tax rebate when they have paid tax in excess of the amount payable to the Income Tax Department in a financial year. To avail income tax exemption, you must ensure that you calculate your tax liability correctly and file your income tax return within the stipulated time.

What is section 87A?

Under the provisions of section 87A of the Income Tax Act, a resident Indian individual whose total income for the financial year does not exceed the prescribed limit, is provided a rebate of 100% on the income tax payable. Till the financial year 2022-23, the income limit for claiming exemption under section 87A was Rs 5 lakh. This means that for the financial year 2022-23, a person whose income was up to Rs 5 lakh was not required to pay any income tax.

Tax Exemption

The maximum income limit for claiming exemption under section 87A has been amended from time to time. In the Union Budget 2019, the government increased the maximum limit of net taxable income to Rs 5 lakh for claiming exemption under section 87A. At the same time, in the Union Budget 2023, Finance Minister Nirmala Sitharaman announced that the rebate under Section 87A will be increased from Rs 5 lakh to Rs 7 lakh, which has brought a big sigh of relief for India’s growing middle class population.

Tax Slab

In the new tax regime, the exemption limit has now been increased to Rs 7 lakh. Thus, in the new tax system, people with income up to Rs 7 lakh will not have to pay any tax. This means that from FY 2023-24 an individual taxpayer who is a resident of India will now be entitled to claim income tax rebate of 100% of the income tax payable on total income above Rs 7 lakh.

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At the same time, many new schemes have also been started by the Central Government in this budget. Although some important changes were expected in the old schemes being run by the government through the people, but the government did not make any changes in them.

PPF Scheme People had high expectations from the budget this time and efforts have also been made by the government to fulfill the expectations of the people. At the same time, Public Provident Fund i.e. PPF scheme is being run by the Central Government.

People were hopeful that this time in the budget, an announcement could be made by the government to increase the limit of PPF scheme. People have been demanding for a long time to increase the maximum investment limit that can be deposited in the PPF scheme in a financial year. Although the expectations of the people remained the same.

PPF Investment

Finance Minister Nirmala Sitharaman did not announce any change regarding PPF in the budget speech 2023. In such a situation, the expectations of the PPF account holders have also suffered a setback. At present, the same benefit that was being available in PPF earlier, will continue to be available in future also. The maximum investment limit in PPF in a financial year will remain Rs 1.5 lakh.

Tax exemption

Apart from this, currently interest is paid on PPF at the rate of 7.1 per cent. At the same time, the tax benefit available in the PPF scheme will also remain the same as before and people will also be able to get tax exemption from the PPF scheme like before.

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There has been no increase in it for the last several years. The last time the 80C limit was increased was in 2014-15. Finance Minister Nirmala Sitharaman made no mention of it while presenting the budget on Wednesday.

Will the limit of section 80C increase or not? There was a lot of discussion about it before the budget. However, Finance Minister Nirmala Sitharaman did not mention anything about this section of the Income Tax Act.

In the news of increase in the tax exemption limit under the new income tax regime, no one paid any attention to this aspect. The Finance Minister did not say anything about this, so it has a meaning. Those who will remain in the old income tax regime in the financial year 2023-24 can claim deduction under this. The maximum deduction that can be claimed under this section of income tax is Rs 1.5 lakh.

When was the limit increased last time?

The Section 80C limit was last increased in the financial year 2014-15. It was then increased by Rs 50,000. This was increased from Rs 1 lakh to Rs 1.5 lakh. It helps in tax saving. The amount invested can be claimed under this section under the old income tax regime. Some people are not able to claim deduction under 80C.

For such people, the government had started a new system with lower tax rates. It was announced in the financial year 2020-21. From April 1, 2020, people had the option to opt for the old tax regime and claim deductions and exemptions. Otherwise, opt for the new regime with a lower tax rate. However, the benefit of deduction and exemption cannot be taken in the new income tax regime.

Benefits available on certain investment products

To claim deduction under section 80C, one needs to spend or invest in certain instruments. They are mentioned in the Income Tax Act. Employees’ Provident Fund (EPF), Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), Sukanya Samriddhi Yojana, National Savings Certificate, etc. are among the products that get the benefit of deduction under 80C. Similarly, this deduction is also available on the expenditure on children’s tuition fees, life insurance policy as well as repayment of home loan principal.

Different types of investment products also have different features under 80C. Their returns, liquidity and tax on returns are different. It is important to look at these features before investing.

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Only 23 days after the presentation of the budget, Russia attacked Ukraine and the war that started between the two countries is still going on. But this war put the whole world in trouble. There was a huge jump in the prices of all other commodities including crude oil. The prices of food and drink skyrocketed, especially wheat and edible oil. And its effect was also seen in India.

In April 2022, the retail inflation rate reached 7.79 percent. And after that remained above 7 percent for several months.  From petrol diesel to cooking gas and PNG-CNG became expensive. After the rise in the inflation rate, the Reserve Bank of India started making loans expensive, then the EMI of the people became expensive. Firstly, the common man was troubled by inflation, on top of that the banks made the EMI expensive 5-6 times. Due to which the budget of every household has deteriorated.

In such a situation, the eyes of the taxpayers are on the fifth budget of the second term of the Modi government. The question arises whether the Modi government will give relief to the taxpayers by reducing the tax rate.

There is no benefit of tax rebate on income above 5 lakhs.

During the meeting with the stakeholders regarding the budget, the stakeholders have demanded the Finance Minister to reduce the tax burden on common taxpayers and rationalize it. At present, no tax has to be paid on income up to Rs 2.50 lakh. But 5% tax has to be paid on income from Rs 2.50 to Rs 5 lakh.

Those whose income is less than Rs 5 lakh, the government gives tax rebate of up to Rs 12,500 under rule 87A. That is, those with taxable income less than Rs 5 lakh do not have to pay any tax. But if the taxable income of a taxpayer is more than Rs 5 lakh and less than Rs 10 lakh, then he has to pay 20% tax directly. Such people do not even get the benefit of Rs 12,500 tax rebate under 87A. And 20 percent tax has to be paid on income above 5 lakhs and 30 percent tax on income above 10 lakhs.

Relief to corporate, burden on taxpayers!

For example, if a taxpayer’s taxable income is Rs 7 lakh, then he has to pay tax of Rs 52,500, and if someone’s taxable income is Rs 12 lakh, he has to pay tax of Rs 1,72,500. Actually taxpayers have to pay 20% tax directly after 5%. There is no middle tax slab of 10 per cent. That’s why there is a demand to rationalize the tax slabs. The government has reduced the corporate rates in 2019 but has not given any relief to the common taxpayers. While taxpayers have had to face inflation since the Corona period in the last few years.

Chances of reduction in tax slab rate!

In such a situation, taxpayers want the government to change the tax slab rate. It is not at all fair to collect 20% income tax directly after 5%. Tax experts are demanding to increase the income tax exemption limit from Rs 2.50 lakh to Rs 5 lakh and to impose 10% tax on income between Rs 5 to 10 lakh. Anyway, this is the last full budget of the Modi government before the Lok Sabha elections, in such a way taxpayers hope that the Modi government will not disappoint them.

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There is about three weeks left for the budget for the financial year 2023-24. The discussion about the budget is happening everywhere. At the same time, people getting salary due to inflation and increase in interest rates also have high expectations from this budget, which includes capital gains tax, increase in exemption limit for home loan and many other types of relief.

Let us tell you, the budget is to be presented by Finance Minister Nirmala Sitharaman on February 1. This time’s budget is considered very important, because it is going to be the last full budget of the second term of the Modi government. For this, we have spoken to Rajendra Sabarwal, Tax Consultant in Mumbai. Let us know what the salary earners expect from the budget in this report.

Tax slab exemption

At present, the taxpayers in the country are given the option of two tax systems to pay income tax. This creates a lot of confusion among people. This time it is likely to end. Along with this, people are likely to get relief due to change in tax slab. At present, people earning up to Rs 2.50 lakh in a financial year have been kept under the ambit of income tax exemption. This time it is likely to be Rs 5 lakh.

Home buyers discount

This time, there is every possibility of increasing the interest rate from RBI, which can increase the scope of exemption for home buyers. Currently, taxpayers get income tax exemption on interest paid on home loans up to Rs 2 lakh. At the same time, filing of 80C is also expected to increase.

Personal loan discount

Personal loans and education loans account for 35 percent of the total loans in India. Education loan is exempt under Section 80E of the Income Tax Act, but there is no such provision for personal loan, which can be considered in this budget.

Uniform capital gains tax

There are many types of properties and according to them different tax rates are imposed by the government. In such a situation, many times people have to face difficulty in understanding this tax system. In this budget, one rate of capital gains tax or uniform capital gains tax can come.

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In the Budget 2023-24 (Budget 2023-24) , the central government can eliminate the requirement of PAN card for some financial transactions. Because if the Aadhaar card is already present, then the need for PAN card can be done away with in financial transactions.

Banks have given this suggestion to the government. These financial institutions say that since the accounts are linked to Aadhaar, there is no need for PAN. Actually the purpose of this move is to simplify the rules as per the demand by the financial institutions and banks.

PAN card is mandatory under the current rules, an official aware of the matter told The Economic Times that the government has received proposals in this regard and they are being inspected. At present, if the PAN card is not given during a financial transaction, then according to section 206AA of the Income Tax Act, if the PAN card is not given, there is a provision to levy tax of up to 20 percent on the transaction. The official said that some bank customers have suggested amendment in the Income Tax Act, as some problems are also arising regarding loans from banks.

Demand to provide relief to customers

Some banks want the Income Tax Act to be amended to avoid unnecessary confusion caused by the current dispensation. The official said a possible clarification on the matter could lay down a specified threshold below which PAN card may not be required.

In fact, some problems had come to the fore during the transaction of money from the bank and PAN card was implemented to prevent fraud and tax evasion. Therefore, if a customer transacts a large amount, then PAN card is required.

Experts believe that if the government takes this decision regarding PAN card, then taxpayers will be benefited. However, some transactions may attract higher tax deductions. Please tell that if a person does a transaction of more than 20 lakhs during a year, then he has to show the PAN card.

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In fact, industry body Assocham has demanded the government to double the income tax exemption limit in the next budget. Assocham has said that if the tax exemption limit is increased from the current Rs 2.5 lakh to Rs 5 lakh, then the demand will increase. This will boost consumption in the economy. At present, income up to Rs 2.5 lakh is not taxed for common citizens. This limit is Rs 3 lakh for senior citizens and Rs 5 lakh for super senior citizens (80 years).

Now companies are insisting on increasing capacity

Assocham President Sumant Sinha said that companies in sectors like steel and cement are now planning to increase capacity. Talking about the risks, he said that there could be a global recession and this would affect foreign trade. In such a situation, India’s GDP can also be affected.

In its pre-budget recommendations, Assocham said the government should raise the income tax exemption limit to at least Rs 5 lakh to leave more disposable income in the hands of the consumer . . The industry body said that this should boost consumption in the economy.

Consumption will get a boost

Sinha said that due to the boom in both direct and indirect taxes, the government has enough scope to increase the income tax exemption limit. Assocham Secretary General Deepak Sood said that leaving more money in the hands of the consumer would encourage consumption, which would have a positive impact on economic growth.

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