Published on Feb 1, 2023Updated on Aug 30, 2026
The Union Budget has a significant impact on the financial well-being of salaried individuals. It sets the tone for the year ahead and helps them plan their spending and savings. A change in tax rates or deductions can positively impact their disposable income, reducing the need for external borrowing. Conversely, a hike in taxes may lead to the reliance on personal loans to cover the gap between expenses and available income. As a result, salaried individuals pay close attention to the budget announcements.
One of the key highlights of the budget is the increase in the rebate under Section 87A from the erstwhile limit of INR 5,00,000 to INR 7,00,000. This is likely to increase the overall consumable income for individuals as their tax expense goes down. It is to be noted that the increase in rebate is only available to individuals under the new tax regime wherein no other deductions are allowed. A tax saving of approximately INR 32,500 is expected due to the above change wherein the individual has a salary of INR 7,00,000 in the previous year and the year wherein the new tax rates are applicable.
An individual under the new regime was previously not allowed any deduction; however, salaried employees are now eligible to receive the benefit of standard deduction thus resulting in a further increase in their overall consumable income. This will boost the consumption capacity of salaried individuals and also impact their ability to take on loans as the increased income allows them to borrow a higher amount of loan as compared to earlier.
Apart from the above, for individuals with very high salaries, the reduction in surcharge on income tax will result in their tax rate falling from 42% to 39% and reduce their tax burden by the rate of 3%.
A negative point though is the increase in Tax Collected at Source (TCS) on foreign payments and purchase of foreign tour packages from 5% to 20% from 01/07/2023, which will increase their traveling cost for 1 year until the same can be claimed in their ITR.
The Union Budget 2023 is a positive indication for individuals through which they are seeing a rise in their consumable income due to a reduction in tax rates, increase in rebates, and introduction of the standard deduction. This, however, applies only to tax-payers under the new tax regime and not to tax-payers under the old tax regime.
An increase in consumable income is positive for individuals which will see an increase in retail consumption. This will allow them to increase their overall spending capacity and will also make them eligible for higher loans. Higher consumable income will allow salaried individuals to attain such loans if needed for purposes such as travel, weddings, education, etc.
If you wish to check your new personal loan eligibility as a salaried individual, you can turn to SMFG India Credit’s online personal loan calculator and apply for a personal loan at affordable interest rates starting from only 12.5%* per annum for long tenues of up to 60 months today!
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