The government is scheduled to unveil the annual budget for the upcoming fiscal year 2025 after the conclusion of the general elections next year. In the meantime, an interim budget will be presented on a “Vote on Account” basis on February 01 of the upcoming year. The interim budget will exclusively address necessary expenditures, typically having a restricted scope and excluding significant policy alterations or the introduction of new programs.
Anticipating significant announcements in the forthcoming interim budget on February 01 is highly improbable. Nevertheless, numerous individuals, particularly salaried taxpayers, have expressed desires and proposed various modifications, such as elevating the Public Provident Fund (PPF) limit or enhancing interest rates in government-sponsored schemes.
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They hope the government will align with their savings and appeals in the upcoming budget. Additionally, as the general elections draw near, there is an expectation that the government might prioritise announcements appealing to voters, potentially incorporating populist measures like tax cuts or subsidies. However, it is acknowledged that the impact of such measures may be temporary.
Engaging with certain personal finance experts underscores the anticipated outcomes people have for this budget, emphasising that previous budget declarations lead them to anticipate fewer tax cuts and giveaways.
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Akhil Chandna, Partner, Grant Thornton Bharat, shares, “With the Budget 2024 fast approaching, individual taxpayers expect enhancements in Sections 80C and 80D deductions, as well as an increase in the standard deduction. The government may raise the ceiling for taxing long-term capital gains on the transfer of equity shares and units of equity-oriented funds from ₹1 lakh to ₹2 lakhs. There is scope to simplify further and rationalise the tax slabs to bring parity between salaried taxpayers and those in business or profession. It is hoped that tax regulations and compliances applicable to individual taxpayers are further simplified.”
Dr Suresh Surana, Founder, RSM India, adds that the government may consider providing relief to the middle-income groups by increasing the limits of certain deductions such as Section 80C. “Please note that the quantum of deduction under Section 80C of the Income Tax Act, 1961 was last revised in FY 2014-15 and as such, the upward revision is long overdue. It is pertinent to note that for the actual tax amendments which would be applicable from FY 2024-25, taxpayers will have to await the final budget which would be announced post the elections, probably in mid-2024,” he said.
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Sujit Bangar, Founder, taxbuddy.com, presents a more elaborate approach. Bangar shares, “Firstly, most of the taxpayers are favouring old tax rate regime. The two tax regimes are creating confusion in the minds of return-filing taxpayers. It shall be better if we keep a single tax rate regime instead of two.”
Adding how healthcare costs are eating into the common man’s savings, Bangar voices in favour of increasing the deduction limit available in health insurance schemes. He adds, “The deduction available under Section 80D may be enhanced to ₹75000 from existing ₹25,000 to promote health insurance given rising health care costs.”
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Explaining the need to include separate deductions towards the money spent on children’s education, Bangar explained, “Deduction against school fees may be de-coupled from Section 80C and separate deduction may be offered for this purpose. It shall further boost the spending on school education. Fees other than tuition fees may also be included for this deduction.” He also seeks enhanced deduction against self-occupied house property to ₹3,00,000 since the annual lettable value has also increased.
However, Suresh Sadagopan, Founder, Ladder7 Wealth Planners, refused to show such optimism. Sadagopan says, “If you look at the taxation regime, there has not been much of a change in the past couple of years. I think the government will maintain the same stance vis a vis personal finance and taxation. I do not expect any adverse policy changes in this area either which the govt will studiously avoid in an election year.”
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Gaurav Goel, Founder and Director, Fynocrat Technologies, echoes views similar to Sadagopan. He elucidates, “We do not expect significant changes on the personal finance and taxation fronts in the upcoming 2024 budget. However, it would be beneficial if the government could increase the basic exemption limit, leaving more money in the hands of taxpayers. This move could indirectly fuel India’s economy in the long run. Additionally, with the government being confident about winning the 2024 elections, they may not take steps solely to appease the ‘Aam Janta’ under pressure.”
A lot is going on in the mutual fund space. In his inimitable style, CA Kanan Bahl, a financial educator and growth consultant, shared, “Any country needs a robust debt market to grow. Moreover, at this time some people might be looking to book their profits and move allocation to debt funds. The Finance Ministry must reconsider their last year’s change to tax debt funds as short term gains (as per slab) and bring back the old rules.”
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Srivatsan Sridhar, Founder and CEO, Skydo – a cross-border payments platform, puts his expectations differently. Instead of seeking exemptions, Sridhar focuses on ushering in the much-needed changes to ring in the desired reforms. Sridhar elucidates, “Many freelancers tend to incorrectly opt for Section 44AD instead of Section 44ADA to avail the benefit of showing six percent income. Freelancers exporting software development and marketing services will benefit if services falling under Section 44ADA can be defined and elaborated.”
Sridhar adds, “There is a need for clarity and simplification in the taxation of employee stock option plans (ESOPs). A more transparent and straightforward approach to ESOP taxation could encourage more companies to include equity in their compensation packages. This, in turn, would enable a larger section of the workforce to participate in wealth generation. Simplifying the taxation process of ESOPs will act as an important step towards enhancing employee incentives and encouraging investment in human capital.”
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Reminding how gold and silver investments are gaining traction owing to inflation and market volatility, Hiren Thakkar, Chartered Accountant Proprietor, Hiren S Thakkar & Associates, added, “From personal finance perspective – gold/silver or sovereign gold bonds (SGBs) must be considered as an eligible investment under Section 80C.”
Basavaraj Tonagatti, a Certified Financial Planner, SEBI Registered Investment Adviser and a Finance Blogger at BasuNivesh sums up the industry’s wishes in so few words. Tonagatti adds, “Firstly, I hope to see a provision granting tax advantages to equity investors who, after liquidating their holdings for reasons such as underperformance, risk reduction, or other factors, reinvest in equity—be it in different funds or stocks. This should be on par with the tax benefits enjoyed by those investing in real estate.”
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“I find it perplexing that in the previous budget, the Finance Minister treated the risk associated with Bank FD holders and Debt Fund holders as identical, leading to the removal of tax advantages for debt funds. Despite the inherent differences in risk between debt funds and bank fixed deposits, the tax regime remained the same. I hope the upcoming budget rectifies this discrepancy and reinstates the previous tax advantages for debt fund investors,” adds Tonagatti.
Talking about how tax deductions must be raised, Tonagatti shared, “In the existing tax regime, the Sec.80C limit has remained at Rs.1.5 lakh for many years. It is my wish that this budget considers raising the limit to accommodate the evolving financial landscape. Senior citizens currently lack tax-free investment options. Annuities, bonds, special schemes like PMVVY or SCSS, and dividend income are all taxable for them. This seems unjust, especially considering their age and reliance on secure income streams. I hope the budget addresses this issue and provides relief for senior citizens.”
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The expectations from this interim budget are not too many, unlike previous budget expectations wherein taxpayers looked forward to drastic increases in exemption limits or lower tax burdens. With the finance minister hinting at not too major changes, taxpayers can only hope for no added tax burden or maybe some bonuses as tax incentives.
