Union Finance Minister Nirmala Sitharaman in her budget speech mentioned the seven priorities of the budget that will guide the country during the Amrit Kaal. She termed the priorities as the Saptarishi or the ‘seven sages’.
The Saptarishi or the Seven Sages are the seven rishis of ancient India who are extolled in the Vedas, and other Hindu literature.
The newly announced proposal for reformation of direct taxes in the new tax regime are intended to improve the economic situation in the country by infusing more funds into the hands of the common tax-payer.
Direct & indirect taxes
With the Union Government announcing the changes in the direct and indirect taxes, the Finance Minister Sitharaman estimated that revenue of about Rs 38,000 crore would be foregone as a result of these proposals, while revenue of about Rs 3,000 crore would have to be additionally mobilised.
Income Tax
One of the most significant changes of the New Income Tax Regime is the unavailability of deductions under Section 80 C of the Income Tax Act, 1961.
The unavailability of this deduction implies that tax savings by making investments into instruments such as ELSS (Equity Linked Savings Scheme) would no longer be possible.
It may be recollected that earlier, under the previous tax regime, an exemption of upto Rs 1.5 lakh could be claimed as a deduction if the said amount was locked-in for a period of 3 years. However, the new regime does not envisage such a deduction any longer.
Instead, the new regime boasts a rebate limit of Personal Income Tax to be increased to Rs 7 lakh from the current Rs 5 lakh in the new tax regime. Thus, persons in the new tax regime, with income up to Rs 7 lakh are not expected to pay any tax.
The tax structure in new personal income tax regime which was introduced in 2020 with six income slabs, has been touted to change by reducing the number of slabs to five and increasing the tax exemption limit to Rs 3 lakh.
Incidentally, the new income tax regime would be made the default tax regime. However, tax assessees shall continue to have the option to avail the benefit of the old tax regime at least for now.
Capital Gains
From the perspective of Capital Gains incurred upon the sale of immovable property and for better targeting of tax concessions and exemptions, the maximum deduction from capital gains on investment in residential house has been capped at Rs 10 crore.
While the proposals made in the 2023 Union Budget signal better financial growth, the fixed deposit (FD) interest rates have been steadily increasing since May 2022 as a result of RBI’s steady hike in the repo rate to control inflation.
In November 2022, India’s annual retail price inflation dropped to 5.88%, the lowest level since December of the previous year, and compared to 6.77% in October 2022.
While investors in fixed deposit products may feel ecstatic regarding the steep increase in interest rates, this rate increase encourages savings and makes less money available in the economy for growth and revenue generation in turn.
