8 Expectations of the Common Man from the Union Budget 2023-24

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A fortnight from now, the Modi 2.0 government will present its full-year Union Budget 2023-24 before it sets off for the Lok Sabha election in early 2024. In times of the rising cost of living, it is natural for the common man to have certain expectations from the Union Budget 2023-24, hoping that it would be populist and elevate their disposable income, gross savings, and facilitate investments.

Here are 8 things that are on the wish list of the common man...

1) Revamp the income-tax slab and the basic exemption limit

Currently, individual taxpayers or assessees have two options to choose from -- the New Tax Regime and the Old Tax Regime. Which one to opt for in the respective assessment year is rather overwhelming and entirely depends on a case-to-case basis. While the new tax regime may be suitable for someone with a Gross Total Income (GTI) of up to Rs 15 lakh, particularly from salary, it is devoid of certain exemptions and deductions.

Typically, the New Tax Regime does not allow claiming exemptions under Section 10 (such as Leave Travel Allowance (LTA), House Rent Allowance (HRA), etc.) and deductions under chapter VIA of the Income Tax Act, i.e. those under Section 80s [such as 80C, 80CCC, 80CCD, 80D, 80DD, 80E, 80EE, 80G, 80GG, 80GGA, 80GGC, 80TTA etc.], the deduction for interest paid on housing loan under Section 24(b), and the standard deduction (of flat Rs 50,000 available to employees).

Moreover, the New Tax Regime does not make a distinction between individual assesses such as non-senior citizens, senior citizens, and super-senior citizens. The basic exemption limit and the applicable tax rates against the respective income slab under the New Tax Regime are common for all.

This, in my view, is rather discouraging. As a result, a lot of individual assessees are opting for the Old Tax Regime (which makes a clear distinction between non-senior citizens, senior citizens, and super-senior citizens for the basic exemption limit and wherein one can avail of the respective exemptions and deductions under the Income Tax Act).

The government should ideally have just one tax regime and increase the basic exemption limit to Rs 5 lakh (from Rs 2.5 lakh at present) and allow exemptions and deductions, whereby the disposable income improves, the culture of savings and investments are promoted, plus support consumption to drive economic growth.

2) Increase the standard deduction limit for salaried individuals

A flat standard deduction worth Rs 40,000 was reintroduced for salaried individuals in the Union Budget 2018-19 after being dropped in the Finance Act of 2005. In the Interim Budget of 2019, this deduction was increased further to flat Rs 50,000, helping salaried individuals reduce their tax outgo.

Considering the elevated inflation, it would be fair if the government increases the standard deduction by another Rs 20,000 to Rs 25,000 in the forthcoming budget providing relief to the salaried class.

3) Raise the deduction limit under Section 80C

The Section 80C limit was last increased in the financial year 2014-15 (from Rs 1 lakh to Rs 1.5 lakh). Since then, the deduction limit under section 80C -- which encourages making tax-saving investments -- has remained unchanged. There is long-standing demand to increase this deduction limit.

In the current inflationary times, the principal portion of the home loan EMI and children's tuition fees (paid to a school, college, university, or any other educational institution) ends up exhausting the deduction limit of Rs 1.50 lakh per financial year. The government, therefore, should ideally consider increasing this deduction up to at least Rs 2.0 lakh per financial year (from the current Rs 1.50 lakh per financial year). This shall offer the lower-middle-income, middle-income, and upper-middle-income assessees more room to make tax-saving investments.

4) Increase the deduction limit under Section 80D

Healthcare costs have gone up. Every individual must have optimal health insurance coverage, but the fact is health insurance premiums have also been increased by general insurers in the last couple of years, particularly after the COVID-19 pandemic.

Taking this into consideration, increasing the Section 80D deduction limit from the present Rs 25,000 for non-senior citizens and Rs 50,000 for senior citizens is very much a justified expectation of the common man.

5) Increasing deduction on home loan interest under Section 24(b)

The price of a house, particularly in the metros, is getting dearer after the COVID-19 pandemic (since it generated a demand for bigger homes).

To add to the woes of those who are genuinely looking to purchase a house property to live in (called primary home), the interest rates of late have been rising (due to the RBI indulging in monetary policy tightening to keep CPI inflation under control) and home loan EMIs today, take a higher share of the household's monthly income.

[Read: Does It Make Sense To Prepay Your Home Loan In a Rising Interest Rate Scenario]

Against this backdrop, the current deduction limit of Rs 2 lakh per financial year under Section 24(b) of the Income Tax Act, 1961, for interest paid on a home loan EMI in the case of Self-Occupied Property (SOP) must be relooked and revised upwards.

6) Raise the exemption for education and hostel allowance for children

Currently, the education allowance available as an exemption under Section 10(14) of the Income Act is Rs 100 per month per child for a maximum of 2 children. Similarly, for hostel allowance, the exemption is Rs 300 per child (for a maximum of 2 children).

These exemption limits were introduced ages ago to meet the rising education cost but haven't been revised ever since. Given that cost of education and hostel accommodation has gone up over the years, it would be sensible to re-evaluate and increase these exemption limits.

7) Introduce new exemption for 'Work From Home'

Since the COVID-19 pandemic, the hybrid work culture or model has been in force. It is enabling companies to save on costs for employers. But in this setting, although the employees have been bearing certain additional costs to deliver and perform their role, they haven't been getting any tax benefit or exemption for the allowance they may be receiving for the same. This deterrent must be addressed to make the 'Work From Home' model tax-beneficial for employees.

8) Raise the Long Term Capital Gain exemption threshold for equities

Since the onset of the pandemic in India in March 2020, over 100 million demat accounts have been opened (as of December 2022). In other words, the retail investors' base is widening, and they are taking the risk to generate wealth to clock an efficient real return (also known as inflation-adjusted return).

Given that there is nearly a 10-fold increase in direct tax collection from stock market activity due to this, and that direct tax collection is expected to increase by 25%-30% in the fiscal year 2022-23 (according to the finance ministry official who earlier spoke to the media), Ms Sitharaman should suitably revise the Long-Term Capital Gain (LTCG) exemption threshold for equities upwards from the current Rs 1 lakh (while the period of 1 year for the long term categorisation for equities may remain same) thereby adding to the disposable income of people.

This positive change shall provide a further boost to the Indian equity markets, encourage more retail participation -- whether in stock or equity mutual funds -- and promote the culture of equity investing. And eventually, this would boost direct tax collection of the government further.

[Read: All You Need to Know about Taxability of Mutual Funds]

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Other than the aforesaid, the Indian mutual fund industry has floated its proposals for the Union Budget 2023-24, which are in the interest of investors at large. Click here to read the expectations of the Indian Mutual Funds from the forthcoming Union Budget.

So, there are many expectations from the last full year Union Budget 2023-24 of the Modi 2.0, hoping it will be populist, bring about acche din (good days), and add to savings and investments for a better tomorrow. But how much of these expectations will be honoured remains to be seen on February 1, 2023 (the date of presentation of the Union Budget).

Until then, Happy Planning and Investing!

ROUNAQ NEROY heads the content activity at PersonalFN and is the Chief Editor of PersonalFN’s newsletter, The Daily Wealth Letter.

As the co-editor of premium services, viz. Investment Ideas Note, the Multi-Asset Corner Report, and the Retire Rich Report; Rounaq brings forth potentially the best investment ideas and opportunities to help investors plan for a happy and blissful financial future.

He has also authored and been the voice of PersonalFN’s e-learning course -- which aims at helping investors become their own financial planners. Besides, he actively contributes to a variety of issues of Money Simplified, PersonalFN’s e-guides in the endeavour and passion to educate investors.

He is a post-graduate in commerce (M. Com), with an MBA in Finance, and a gold medallist in Certificate Programme in Capital Market (from BSE Training Institute in association with JBIMS). Rounaq holds over 18+ years of experience in the financial services industry.