This week the most awaited budget 2023 has been announced!
Since then, there are lot of discussions, debates & explanations going around.
The budget is focused on ‘7 key areas’ viz,
- INCLUSIVE DEVELOPMENT
- REACHING THE LAST MILE
- INFRASTRUCTURE & INVESTMENT
- UNLEASHING POTENTIAL
- GREEN GROWTH
- YOUTH POWER
- FINANCIAL SECTOR
Many provisions have been made in the above areas but let’s focus on the provisions which have direct & indirect impact on our money & personal finance:
- Mahila Samman Bachat Patra
New investment has been introduced for ‘women investors’ named as ‘Mahila Samman Bachat Patra’. It will come with a tenure of 2 years with maximum investment of upto Rs 2 lakhs.
It will provide a fixed rate of interest as 7.50%
It will come with a ‘partial withdrawal’ option as well.
Likely impact & benefit:
Women with small savings potential can now be able to invest their hard-earned money with safety for a tenure of 2 years with fixed income potential too.
- Maximum limit of investment increased for Senior Citizen Savings Scheme:
Maximum limit of investment for Senior Citizen Savings Scheme has been increased to RS 30 lakhs. Earlier the limit was Rs 15 lakhs for one a/c.
Likely impact & benefit:
Retirees & senior citizens with age above 60 can avail the benefit of Senior Citizen Savings scheme with increased investment limit. It is one of the safer investments with fixed income.
- Maximum limit of investment for Monthly income Scheme:
Maximum investment limit for Post office monthly income scheme has been increased to Rs 9 lakhs for individual a/c & RS 15 lakhs for joint holdings.
Current limit is RS 4.50 lakhs for Individual a/c & RS 9 lakhs for joint a/c.
Likely impact & Benefit:
This investment is beneficial for people seeking regular income like retirees. With enhanced limit, they can now invest more in such safer option & earn regular income.
- PAN will be a common identifier for KYC for specified government agencies.
KYC registration process will be made easier henceforth for specified agencies.
- Capital gain tax deduction under section 54 & Section 54F has now been capped at to INR 10 Cr.
The capital gains made out of purchase of new residential properties with high costs will now be capped. So, high -cost properties & capital gains can not be claimed beyond 10 cr now.
- New tax regime will now be made a ‘default regime’ however, assesses are free to choose old tax regime.
This budget proposes new tax regime to be a default one. This tax regime doesn’t provide all the deductions which old tax regime provides.
However, it totally depends on your taxable income to choose the tax regime suitable to you. A salaried person can choose new tax regime at the start of FY 2023-24 while non- salaried tax payers do not have option to frequently choose to opt-in & opt -out.
- Revised tax slabs under new tax regime & full tax rebate under section 87A for income upto RS 7 lakhs:
New tax regime has introduced revised tax slabs as below-
|Income Tax slab||% Tax applicable|
|Rs 0 to RS 3,00,000||NIL|
|Rs 3,00,001 to RS 6,00,000||5%|
|Rs 6,00,001 to RS 9,00,000||10%|
|Rs 9,00,001 to Rs 12,00,000||15%|
|Rs 12,00,000 to Rs 15,00,000||20%|
|Rs 15,00,001 & above||30%|
Along with the above, section 87A has been introduced which can give a relief to many.
Here, under section 87A, if you have income upto Rs 7 lakhs then you can claim tax rebate. To understand more, please refer below-
Impact of the provision:
Let’s say, Mr A has taxable income of Rs 7 lakhs. Here, as per new tax slabs, he will be liable for tax in the new regime as follows-
For income upto Rs 3 lakhs- Rs 0
For income from Rs 3,00,0001 to Rs 6,00,000- Rs 15,000
For income from RS 6,00,000 to Rs 7,00,000- Rs 10000
So, as per the above tax slabs, total taxable income of Rs 7 lakhs draws a tax liability of Rs 25,000. But then, Section 87A comes in picture.
This makes tax liability of RS 25,000 to Rs 0 as provided in the budget 2023.
- The old tax regime remains the same:
With introduction of revised tax slabs & section 87A rebate, this budget has kept old tax regime as the same.
Please refer below tax slabs under Old tax regime:
|Income Tax slab (in Rs)||Tax applicable|
|Rs 0 to Rs 2,50,000||NIL|
|Rs 2,50,001 to Rs 5,00,000||5%|
|Rs 5,00,001 to Rs 10,00,000||20%|
|Rs 10,00,001 & above||30%|
Old tax regime provides tax deductions for individuals. While calculating tax liability, individuals should consider both tax regimes & file the most suitable one.
- Traditional life insurance policies with aggregate annual premium of more than Rs 5 lakhs will not attract taxes:
“It is proposed to provide that where aggregate of premium for life insurance policies (other than ULIP) issued on or after 1st April, 2023 is above Rs 5 lakh, income from only those policies with aggregate premium up to Rs 5 lakh shall be exempt. This will not affect the tax exemption provided to the amount received on the death of person insured. It will also not affect insurance policies issued till 31st March, 2023,” Finance Minister Nirmala Sitharaman said in her Budget speech.
This means that, all traditional life insurance polices i.e. endowment policies issued after 1 st April 2023, with aggregate annual premium of more than Rs 5 lakhs will be taxable. This will make their maturity proceeds taxable.
This provision will make high value policies less attractive when people buy it to save tax.
If a person has multiple policies issued after 1st 2023 where total aggregate premium is more than RS 5 lakhs, then it will become taxable.
However, tax provisions wrt death claim remains the same as earlier.
- Leave encashment limit has been increased to Rs 25 lakhs:
Under section 10 (10 AA),Before the budget, encashment of the earned leave , for the employees other than central & state government ,was exempt for the amount lowest among the below-
- Rs 3 lakhs
- Actual Leave encashment amount
- Average salary (basic salary + dearness allowance) of the last 10 months before the employee’s retirement or resignation
- Cash equivalent of pending leave days. The leave basis is a maximum of 30 days leave for every year service.
Now, this limit of Rs 3 lakhs is increased to Rs 25 lakhs as per the budget 2023.
Every budget comes with some new provisions for our country, economy, society. We need to understand it well so that we can take rightly benefit of the same.