By Ratna K
Budget 2024 income tax expectations: With the government’s 3.0 Budget round the corner, taxpayers are optimistic that the finance minister will introduce measures aimed at revitalizing the economy and alleviate the financial burden on individuals. Expectations are particularly high for policies that can stimulate growth while ensuring equitable distribution of benefits, and impact positively every household and business in the country.
Foremost among the anticipated reforms is the rationalization of the basic exemption limit under the simplified and old tax regimes.Currently, the limit is set at Rs 3 lakhs and 2.5 lakhs respectively, leading to confusion amongst taxpayers. It is therefore suggested for a uniform increase of the basic exemption limit to Rs 5 lakhs under both the tax regimes. This measure aims to reduce compliance burden on the taxpayers while giving them greater financial flexibility.
With the new tax regime made a default regime effective 1 April 2023, it has gained popularity among taxpayers at large, due to its additional benefits to different income groups. For example, resident taxpayers with income below Rs 7 Lakhs and high net-worth individual taxpayers earning above Rs 5 crores are benefitted with nil and reduced tax liability respectively. However, middle-income taxpayers have to choose between the regimes due to common exemptions like HRA, LTA and Chapter VI-A deductions. To further enhance attractiveness of simplified tax regime, there is the expectation to tweak the tax slab rates by increasing the 30% tax slab limit from Rs 15 lakhs to Rs 20 lakhs. Additionally, there is anticipation to enhance the standard deduction and the deduction for NPS contributions to Rs 1 lakh from Rs 50,000.
Also Read | Income Tax Expectations Budget 2024: What can the salaried, individual taxpayers expect? Top points
Off late, many taxpayers have chosen NPS owing to its market linked returns and tax-savings advantages besides being a retirement funding plan. Currently, central government employees enjoy a deduction of up to 14% of salary while private sector employees enjoy only up to 10%. Similar to the parity brought in for the leave encashment and gratuity deductions to both the sets of employees, extending the NPS deduction limit of 14% for private sector employees also, would level the playing field for all.
While there are taxpayers who are looking for further benefits under the new tax regime, those who continue to remain under the old tax regime are also anticipating reforms. With concerns on rising health costs and property costs since the pandemic, there is a growing cause to enhance deductions under section 80C to Rs 2.5 lakhs, under section 80CCD(1B) for NPS to Rs 1 lakh, for home loan interest to Rs 3 lakhs and for Mediclaim premium to Rs 1 lakh. In addition, it is recommended to increase the limit under section 80TTA of Rs 10,000 to Rs 50,000 and to include interest from all types of deposits along with interest from savings bank account under its ambit. This move is aimed at reducing tax burden and promoting tax saving and small scheme investments.
Senior citizens have also been urging for reforms that directly benefit them. They seek the extension of deductions under section 80TTB to cover interest income from small saving schemes, particularly post-office schemes, providing them fixed incomes. They also seek rationalization of lock-in periods for tax saving investments to facilitate funding medical emergencies and to rationalize tax burden on passive incomes such as rent, dividends, capital gains. This is essential for securing their financial stability amidst escalating living costs.
Also Read | Budget 2024 income tax expectations: Are you paying excess tax? You may be paying Rs 43,226 extra on Rs 10 lakh income – find out why
Further to the above, anticipation is high with regard to bolstering green energy initiatives from electric vehicles to installation of solar-related installations in homes. This initiative is in line with the government’s dedication to fostering renewable energy sources as seen in the interim budget released in February 2024, promoting the electric vehicle (EV) ecosystem through development of more charging stations. In this context, another recommendation is to introduce specific perquisite valuation mechanism and rules for usage of hybrid and electric cars besides announcing sops towards adoption of solar-powered equipment.
As the countdown to the Budget intensifies, stakeholders nationwide are eagerly awaiting these potential reforms. The reform expectations reflect a strategic approach towards balancing economic growth with individual financial empowerment, setting the stage for a Budget that could redefine the landscape of personal taxation in India besides catering to the overall welfare of taxpayers across the country.
(The author is Ratna K, Executive Director, DHS LLP. Ankit Agarwal, Associate Director, DHS LLP and Amritha S, Assistant Manager, DHS LLP contributed to the article)
Budget 2024 income tax expectations: With the government’s 3.0 Budget round the corner, taxpayers are optimistic that the finance minister will introduce measures aimed at revitalizing the economy and alleviate the financial burden on individuals. Expectations are particularly high for policies that can stimulate growth while ensuring equitable distribution of benefits, and impact positively every household and business in the country.
Foremost among the anticipated reforms is the rationalization of the basic exemption limit under the simplified and old tax regimes.Currently, the limit is set at Rs 3 lakhs and 2.5 lakhs respectively, leading to confusion amongst taxpayers. It is therefore suggested for a uniform increase of the basic exemption limit to Rs 5 lakhs under both the tax regimes. This measure aims to reduce compliance burden on the taxpayers while giving them greater financial flexibility.
With the new tax regime made a default regime effective 1 April 2023, it has gained popularity among taxpayers at large, due to its additional benefits to different income groups. For example, resident taxpayers with income below Rs 7 Lakhs and high net-worth individual taxpayers earning above Rs 5 crores are benefitted with nil and reduced tax liability respectively. However, middle-income taxpayers have to choose between the regimes due to common exemptions like HRA, LTA and Chapter VI-A deductions. To further enhance attractiveness of simplified tax regime, there is the expectation to tweak the tax slab rates by increasing the 30% tax slab limit from Rs 15 lakhs to Rs 20 lakhs. Additionally, there is anticipation to enhance the standard deduction and the deduction for NPS contributions to Rs 1 lakh from Rs 50,000.
Also Read | Income Tax Expectations Budget 2024: What can the salaried, individual taxpayers expect? Top points
Off late, many taxpayers have chosen NPS owing to its market linked returns and tax-savings advantages besides being a retirement funding plan. Currently, central government employees enjoy a deduction of up to 14% of salary while private sector employees enjoy only up to 10%. Similar to the parity brought in for the leave encashment and gratuity deductions to both the sets of employees, extending the NPS deduction limit of 14% for private sector employees also, would level the playing field for all.
While there are taxpayers who are looking for further benefits under the new tax regime, those who continue to remain under the old tax regime are also anticipating reforms. With concerns on rising health costs and property costs since the pandemic, there is a growing cause to enhance deductions under section 80C to Rs 2.5 lakhs, under section 80CCD(1B) for NPS to Rs 1 lakh, for home loan interest to Rs 3 lakhs and for Mediclaim premium to Rs 1 lakh. In addition, it is recommended to increase the limit under section 80TTA of Rs 10,000 to Rs 50,000 and to include interest from all types of deposits along with interest from savings bank account under its ambit. This move is aimed at reducing tax burden and promoting tax saving and small scheme investments.
Senior citizens have also been urging for reforms that directly benefit them. They seek the extension of deductions under section 80TTB to cover interest income from small saving schemes, particularly post-office schemes, providing them fixed incomes. They also seek rationalization of lock-in periods for tax saving investments to facilitate funding medical emergencies and to rationalize tax burden on passive incomes such as rent, dividends, capital gains. This is essential for securing their financial stability amidst escalating living costs.
Also Read | Budget 2024 income tax expectations: Are you paying excess tax? You may be paying Rs 43,226 extra on Rs 10 lakh income – find out why
Further to the above, anticipation is high with regard to bolstering green energy initiatives from electric vehicles to installation of solar-related installations in homes. This initiative is in line with the government’s dedication to fostering renewable energy sources as seen in the interim budget released in February 2024, promoting the electric vehicle (EV) ecosystem through development of more charging stations. In this context, another recommendation is to introduce specific perquisite valuation mechanism and rules for usage of hybrid and electric cars besides announcing sops towards adoption of solar-powered equipment.
As the countdown to the Budget intensifies, stakeholders nationwide are eagerly awaiting these potential reforms. The reform expectations reflect a strategic approach towards balancing economic growth with individual financial empowerment, setting the stage for a Budget that could redefine the landscape of personal taxation in India besides catering to the overall welfare of taxpayers across the country.
(The author is Ratna K, Executive Director, DHS LLP. Ankit Agarwal, Associate Director, DHS LLP and Amritha S, Assistant Manager, DHS LLP contributed to the article)
