As we get closer to the unveiling of Budget 2024, let’s take a look at some of the salaried taxpayer’s expectations.
Finance Minister Nirmala Sitharaman is all geared up to present the budget for the fiscal year (FY) 2024-25 on 01 February 2024, for the sixth consecutive year. So far, India has witnessed 91 budgets, which are 73 annual budgets, 14 vote-on-account or interim budgets and 4 special budgets, or mini-budgets. The upcoming Lok Sabha elections this year will mark the country’s 15th Interim Budget.
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The government is prohibited by the Election Commission of India’s Code of Conduct from proposing significant tax reforms in the interim budget since doing so might influence voters and jeopardize a fair election process. The purpose of the interim budget is only to cover expenses until the new government is constituted. This year’s budget will merely be a Vote on Account; thus, taxpayers shouldn’t anticipate any major announcements. The full-fledged FY 2024-25 budget will be presented upon the formation of the new government.
However, some relief measures were announced in the 2019 interim budget, such as an increase in the standard deduction available to salaried individuals and income up to INR 5 lakh being exempt from income tax, etc. Thus, as we get closer to the unveiling of Budget 2024, let’s take a look at some of the salaried taxpayer’s expectations:
1. Rationalization of the slab rates
Many individuals expect the government to revise the income tax slab rates to make them more progressive and reasonable. This could potentially lead to a reduction in taxes for the middle-income group. Further, currently, the maximum surcharge rate levied in the new tax regime is 25%; however, under the old tax regime, it is 37%. The relief provided under the new tax regime might be extended to the old tax regime as well.
2. More cities to be included in the 50% House Rent Allowance (HRA) tax exemption list
To compute the HRA exemption, more tier-2 cities should be included in the list of metro cities. In terms of HRA exemption, currently only a few selected cities, such as Mumbai, Delhi, Kolkata, and Chennai, are regarded as metro cities. Residents of other significant cities, including Bengaluru, Hyderabad, Pune, Gurgaon, Ahmedabad, etc. are hoping that these cities will be added to the metro cities list for the HRA exemption purpose as well.
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3. Increase in deductions
(a) Section 80D: Health Insurance Premium
The limits of deduction on the health insurance premium paid under section (u/s) 80D of the Income Tax Act, 1961 (“the Act”) should also be increased, consider rise in healthcare costs.
(b) Section 80C:
The government may think about raising the deduction limit u/s 80C of the Act to provide relief to middle-class taxpayers. Since the amount of the deduction under Section 80C was last changed in FY 2014-15, the limit has been at INR 1.5 lakh for a considerable amount of time, and the upward revision is long overdue.
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(c) Standard Deduction:
There is also a demand for an increase in the standard deduction limits. This deduction reduces the taxable salary income by INR 50,000, and individuals hope that it is increased to provide them with more disposable income.
(d) Section 80TTA: Deduction on Interest on Saving Bank Accounts
Given that salaried individuals are unlikely to retain all their money in a single savings bank account, which normally offers a lower interest rate than term deposits, a portion of savings may be transferred to term/recurring deposits in banks for better returns. Therefore, the government may decide to include interest on different kinds of bank deposits (e.g., fixed deposits) u/s 80TTA. Moreover, the threshold for this inclusion may be increased from INR 10,000 to INR 50,000.
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4. Rationalization of New Tax Regime
The deductions available to an individual under the older tax regime, such as the deduction of health insurance paid and employee contributions towards NPS, should be extended to the new tax regime as well, so as to promote equitable access to healthcare and encourage savings and investments among taxpayers.
5. Increase In Limit of Deduction from Loss on House Property
Currently, the limit to claim deductions against self-occupied property is INR 2 lakh. This limit should be enhanced to INR 3 lakh considering the average cost of a flat and the size of housing loans.
While the 2024 budget is an interim one with limited expectations, individuals have their own personal budget expectations. The measures stated above, if implemented, would provide much-needed relief to individuals and help them manage their finances efficiently.
