• Notification Date: 27-01-2023
• Notification No: N/A

Income tax Slab for Middle-class under consideration in Union Budget 2023

The finance ministry is considering proposals that would benefit the middle class in its last full Budget in the second term of the Narendra Modi government. The Union Budget 2023 is to be presented on February 1 in the Lok Sabha. 

The finance ministry is considering new proposals sent by various government departments on specific steps which may be announced in the upcoming Budget. It is expected to benefit a large section of the middle class, according to the sources. The government has not raised the income tax exemption limit from Rs 2.5 lakh which was fixed in 2014 by the then Finance Minister Arun Jaitley in his first Budget. Besides, the standard deduction has remained at Rs 50,000 since 2019.  

In this situation, many experts are of the opinion that the exemption limit as well as standard deduction need to be increased to compensate salaried middle class for elevated level of inflation. Finance Minister Nirmala Sitharaman has recently stated that she was aware of pressures of the middle class and she has raised hope that some incentives may come for them in the upcoming Budget. 

"I too belong to the middle class so I can understand the pressures of the middle class. I identify myself with the middle class so I know," she had said earlier this month. Alongside, the minister reminded that the present Modi government has not imposed any fresh taxes on the middle class. 

She added that the government has taken various measures like developing the metro rail network in 27 cities and building 100 smart cities to promote ease of living. The minister also gave the assurance that the government would do more for the middle class as its population is growing and it has become sizeable now. 

"I quite recognise their problems. The government has done a lot for them and continue doing the same," she said without making any commitment. Besides considering the exemption limit and standard deduction, the finance ministry is also looking at the possibility of increasing limit under 80C which includes investment in life insurance, FD, bonds, housing and PPF, among others. 

As per the reports from sources, payment towards medical insurance premium is also being looked at. It also mentioned that the government may simplify capital gains tax rules to benefit the middle-class investors which have started investing in capital markets. The insurance industry has been pitching for a separate tax deduction provision for life insurance, tax waiver for annuity income, and higher deductions for health insurance premiums. 

If there is an increase in the limit under 80C with special focus on the insurance segment, it will help push term insurance or other protection scheme, which can provide essential financial protection to the family in the event of an untimely death of the earning member, said Max Life Insurance MD and CEO Prashant Tripathy.