"Where’s the money, honey?" is a common question asked by the great Indian Middle Class when it comes to the India budget. The India budget is like the ultimate birthday gift for the country. Everyone's waiting with bated breath to see what goodies the government has in store. But the middle class, bless their hearts, they're like the "best friend" of the country, always there to support and keep things lively. So, you better believe they will have a lot to say and react to on the budget. We'll be exploring their hopes (you know they have high expectations), their expectations (they always expect the best), and their concerns (they can be drama queens at times). Whether you're a member of the middle class yourself or just a curious bystander, it is a journey into the minds of the people who keep the country's economy ticking. So, when it comes to the budget, it's all about "Where is the money, honey?" and making sure it's being used in the best possible way.
1. Presumptive Taxation for MSMEs & Professionals
Currently, Micro enterprises with turnover up to ₹ 2 Cr and certain professionals with turnover of up to ₹ 50 lakh avail the benefit of presumptive taxation. In this budget, it is proposed to enhance the limit to ₹ 3 cr. and ₹ 75 lakh respectively, if cash receipts are not more than 5%. This will ease compliance and promote non-cash transactions and benefit professionals offering consultation services.
2. Tax exemption in capital gains from Land/Building capping at 10Cr
Currently, capital gains arising from sale of land/building were exempted if the proceeds were reinvested in another residential property. It is now proposed to put a cap of ₹ 10Cr. on such investments.
Usually, this exemption is misused to save capital gain tax on high value properties. This proposal will put an end to such loopholes in the regulation. This amendment will be in effect from 01-Apr-2024.
3. Interest on Home Loan
Currently, if a residential property is purchased using a home loan, the interest component is eligible for a deduction u/s 24 B up to ₹ 2L. However, this can also be included as cost of acquisition or improvement during the sale of property along with indexation benefit which reduces the capital gains.
It is a loophole in the regulation to save double taxation on the same amount. It is now proposed that the cost of acquisition or improvement shall not include the amount of interest claimed earlier as deduction. Going forward, only one of the following can be claimed,
4. Insurance Policies with High Value
Currently, all insurance policies except ULIP fall under EEE category which means the maturity proceeds are tax exempted. They are usually being used more as a tax saving investment option rather than life insurance need. With the current amendment in the finance bill, it is now capped at an aggregate annual premium of ₹ 5 Lakhs.
In simple words, maturity proceeds from insurance policies issued after 31-Mar-2023 will not be tax exempt if the aggregate annual premium is more than ₹ 5 Lakh. We await further outcomes on the actual implication of this regulation especially in terms of calculating the proportionate maturity amount relating to annual premiums in excess of ₹ 5 lakhs.
5. Market Linked Debenture (MLD)
At present, long term capital gains from market linked debentures enjoy a capital gain tax of 10% just because it is linked to the market. Although most of the investments are in debt papers, it is treated as equity investment and hence taxed as an equity asset class. Due to the concessional tax benefit of 10%, these products have been mis-sold as tax saving instruments without disclosing the inherent risk.
It is now proposed to tax market linked debenture as short-term capital gains which simply means tax applies as per the individual tax slabs. This amendment will be in effect from 01-Apr-2024.
6. TDS on Listed Securities
At present, Interest income from listed securities is exempted from TDS and it is now proposed to withdraw this exemption, meaning all listed securities will attract TDS on payment of interest. We await more clarity on Tax Free Bonds.
7. Leave Encashment
Tax exemption for leave encashment during retirement was capped at ₹ 3L for non-govt. salaried employees. It was set in 2002 when the highest basic pay in govt was ₹ 30,000. There was a serious need to increase this limit. It is now proposed to enhance this limit to ₹ 25 lakhs to align with the current govt salaries.
8. Senior Citizen Savings Scheme (applicable for senior citizen)
Maximum investment limit has been increased from ₹ 15 lakh to ₹ 30 lakh. As a husband & wife – Totally, now ₹ 60 lakh can be invested in Senior Citizen Savings Scheme. It will be beneficial for middle class pensioners.
9. Post Office Monthly Income Scheme
Maximum investment limit has been increased from ₹ 4.50 lakh to ₹ 9 lakh. As a joint holding pattern – Totally, now ₹ 15 lakh can be invested in PO-MIS. It is applicable for both senior citizen as well as non-senior citizen.
10. Liberalized remittance scheme
The current and proposed TCS rates are tabulated as under
|Type of remittance
|For the purpose of any education If the amount being remitted out is a loan obtained from any financial institution as defined in section 80E.
|0.5% of the amount of the aggregate of the amounts in excess of rupees 7 lakhs
|For the purpose of education other than (i) or for the purpose of medical treatment
|5% of the amount or the aggregate of the amounts in excess of rupees 7 lakh.
|Overseas tour package
|5% without any threshold limit
|20% without any threshold limit
|Any other case
|5% of the amount or the aggregate of the amounts in excess of rupees 7 lakhs.
|20% without any threshold limit
11. Allocation to Capital Expenditure
(key to economic development) increased by 33% YoY to ₹ 10 Lakh Cr. It is positive for markets due to expected high growth in various allied sectors i.e. banking, Capital goods, Infrastructure developers, Infra raw materials etc. With this, Fiscal deficit for FY23-24 (targeted at 5.90% of GDP) i.e. ₹ 11.8 Lakh Cr would be market borrowing. As per glancing of this number, we expect that G-Sec yields will be stable.
12. Reclaiming of shares and dividends
An integrated IT portal will be established for the investors to reclaim unclaimed shares and dividends from the Investor Education and Protection Fund Authority.
Changes related to New Tax Regime
There was a consensus that the govt would bring some changes in personal income tax to make new tax regime more attractive and rightfully so, following changes are proposed in the finance bill 2023.
Prima facie, with the above changes, the new tax regime looks attractive providing no deduction is claimed. However, if we consider various deductions available under old regime, it will differ from person to person. Read here in detail to know which regime would work for you.
the budget proposal of 2023 includes changes in presumptive taxation for MSMEs and professionals, tax exemption in capital gains from land/building, interest on home loans, insurance policies with high value, market linked debentures, TDS on listed securities, leave encashment, senior citizen savings scheme, post office monthly income scheme, and liberalized remittance scheme. The allocation to capital expenditure has increased by 33% YoY, and a portal will be established for reclaiming unclaimed shares and dividends. Additionally, the new tax regime has been set as the default for individuals and HUF, with certain changes proposed to make it more attractive.
Ultimately, the budget reflects the government's priorities and the resources it has available to address the needs of the country. It is important for all stakeholders to engage in a robust and open dialogue about the budget, to ensure that the government is taking the best possible approach to addressing the needs of the country, and to promote transparency, accountability, and effective use of public resources.