From next financial year, the new income tax regime will be default regime with the changes proposed in the Budget intended to not only narrow the gap with the old tax regime but make it more attractive for the higher income brackets not bothered about long-term savings.
The Budget has proposed many big changes in the new regime. There is now a standard deduction of Rs 50,000, raising the basic tax exemption limit to Rs 3 lakh and reducing the surcharge for the super rich. The number of slabs has been reduced while nothing has changed for those in the old tax regime. Moreover, people in the new tax regime with income up to Rs 7 lakh will not have to pay any tax.
For those who don’t want deductions and exemptions, the new tax regime has already become a more attractive choice with income of over Rs 5 crore annually.
But the new regime can also be an option for others as well. Individuals earning up to Rs 7 lakh will pay no tax in contrast with those earning the same amount under the old regime who will have to pay tax of Rs 22,901 after making payouts for house rent and investments under Sections 80C, 80CCD (1B) and 80D. Had there been no Budget concessions, new regime taxpayers would have had to pay Rs 33,800.
But for those earning Rs 10 lakh, the new regime taxpayer’s outgo is Rs 54,600 as against Rs 31,221 which means a substantial gap of over Rs 23,000. Had there been no sops, the outgo under the new regime would have been Rs 78,000.
However, the picture again changes for those earning Rs 20 lakh. The gap between the two regimes narrows to just Rs 6,000. And for those earning Rs 35 lakh, the gap is just 1% of the tax outgo. The tax outgo definitely is less under the new scheme for those earning Rs 55 lakh, mainly because the highest surcharge rate has been reduced from 37% to 25%.
The benefits under the old scheme, though applicable to fewer slabs, is premised on the use of a raft of concessions such as medical insurance, NPS, up to Rs 1.5 lakh under 80C etc. None of this is a prerequisite for the new scheme which, however, conveys the message that instant consumption is better than prudent term savings for a rainy day.
Surge in term insurance likely as rebate on high-value policies goes
The Budget has proposed to take away the tax-free advantage from traditional insurance plans if the annual premium is above Rs 5 lakh in a year on the policies issued on or after April 1. Insurers feel this may lead to surge in the purchase of term policies that are pure life insurance policies without the element of savings. The proposal, will, however, not impact taxation of unit-linked insurance plans (ULIPs), term insurance and old policies.
“With this announcement, the proceeds of these policies will be taxed as per an individual’s tax slab, expect in case of demise. This announcement is mainly for insurance policies which are purchased from the point of view of long-term savings. This may lead to an increase in the purchase of term insurance policies that are pure life insurance policies without the element of savings,” said Sanjib Jha, CEO, Coverfox Group.
Life insurance policies are taken against the risk of life of a person. In order to curb blanket exemptions on such policies, the Finance Bill 2023 proposes to exclude policies (other than ULIP) which give insured investment-based returns from such exemptions.
Agriculture gets raw deal
The government on Wednesday announced plans to make India the global hub of millets, push digital infrastructure in the farm sector and create decentralised capacities at the panchayat level, even as the allocation for the key sector has been reduced by Rs 9,000 crore.
To encourage agricultural startups in rural areas by young entrepreneurs, a new Agriculture Accelerator Fund has been announced to bring innovative and affordable solutions for challenges faced by farmers.
Taking forward the cooperative-based economic development model to help small and marginal farmers, Union Finance Minister Nirmala Sitharaman announced plans to set up a massive decentralised storage capacity for farmers.
“This will help farmers store their produce and get remunerative prices in time. The government will facilitate setting up of several multipurpose cooperative societies, primary fishery and dairy cooperative societies in villages in the next five years,” she said, listing the goal of helping 1 crore farmers over the next three years to adopt natural farming through newly announced Bharatiya Prakritik Kheti Bio-Input Resource Centres.
Several new schemes, including the Rs 6,000 crore Pradhan Mantri Matsya Sampada Yojana, to further enable the activities of fishermen, fish vendors, and micro and small enterprises, notwithstanding, representatives of farmer unions who led a nearly year-long agitation against farm laws did not appear impressed with the Budget saying sector allocationd was cut by Rs 9,000 crore.
The Budget estimate for 2023-24 is a substantial Rs 1.15 lakh crore, though it is down from over Rs 1.24 lakh crore allocation in 2022-23, a reduction of 6.8 per cent.
The allocation under the Pradhan Mantri Fasal Bima Yojana has been cut from Rs 15,500 crore in 2022-23 to Rs 13,625 crore in 2023-24 Budget estimates (12 per cent reduction). The budget for the PM Kisan Samman Nidhi scheme, which offers an annual direct financial assistance of Rs 6,000 to farmers, has been pruned from Rs 68,000 crore in 2022-23 to Rs 60,000 crore in 2023-24, a decline of 12 per cent.
Customs duty on silver hiked to 15%
Customs duty on silver has been hiked from about 10.75% to 15% to bring it on a par with duty on gold. Despite that, domestic silver prices saw an increase of only 1.5-2%, reflecting lower domestic demand.
Deposit limit for senior citizens up
Deposit limit for Senior Citizen Savings Scheme up from Rs 15 lakh to Rs 30 lakh. Monthly Income Account Scheme limit up from Rs 4.5 lakh to Rs 9 lakh for single a/c, Rs 9 lakh to Rs 15 lakh for joint a/c.
– Rs 15 lakh previous limit
– Rs 30 lakh revised limit
Rs 52,937 cr push for BSNL revival
To provide high-speed internet in farthest corners of the country, the Union Government has allocated Rs 52,937 crore for Bharat Sanchar Nigam Limited (BSNL), the state-run telecom carrier. This is primarily for 4G spectrum, technology upgrading and restructuring of the company. In July 2022, the Centre had announced a Rs 1.64 lakh crore revival package for the BSNL.
Education set for hi-tech boost
Three centres of excellence in artificial intelligence (AI), an ambitious plan to skill lakhs of youths over the next three years, and development of new-age courses like coding, robotics, mechatronics, IOT, 3D printing and drones are part of this year’s Budget announcements for the education sector. The highlight of the sector is a record allocation of Rs 1.12 lakh crore. The Ministry of Education said while the school education has been allocated Rs 68,804.85 crore, higher education received Rs 44,094.62 crore.
Source: TNS