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Income tax benefits from Budget 2024: As the date of July 23rd draws near, expectations for Budget 2024 are reaching a fever pitch, centered around Finance Minister Nirmala Sitharaman’s upcoming presentation. Expectations include a potential hike in standard deduction, relief in income tax rates, and an increase in Section 80C exemptions from Finance Minister Nirmala Sitharaman. Tax experts anticipate adjustments to income tax slab rates, which have seen limited revisions for some time. They suggest that the Finance Minister might announce tax reductions in the Modi 3.0 government’s first budget.
Livemint spoke to income tax experts to gauge taxpayer and expert expectations ahead of Budget 2024.
Standard deduction
The standard deduction was first introduced at ₹40,000 in the 2018 budget and subsequently raised to ₹50,000 in the 2019 budget. The deduction amount has not changed since then.
“The current deduction of ₹50,000 could moderately increase to ₹60,000 or possibly ₹70,000, which salaried employees would welcome as it lowers their taxable income,” said Ashish Aggarwal, Director at Acube Ventures.
Section 80C exemption
Salaried persons can use Section 80C exemptions to reduce their taxable income by ₹1.5 lakh in a fiscal year.
Archit Gupta, Founder and CEO of ClearTax, emphasised revising the Section 80C limit, which has remained unchanged since 2014 despite escalating inflation rates. Such a revision, he noted, would aid taxpayers in managing inflation and encourage savings and investments in essential financial instruments such as ELSS, tax saver FDs, and PPF. This aligns with the broader goal of fostering a financially resilient and prosperous India.
Increase income tax exemption limit
Various media reports indicated that the Centre plans to increase the income threshold before imposing any tax from ₹3 lakh to ₹5 lakh in the upcoming budget. This adjustment will specifically affect taxpayers filing under the new tax regime.
“If the hike in income tax exemption to ₹5 lakh is implemented, it would mean that individuals with an annual income of up to ₹8.5 lakh could potentially pay no income tax. This calculation considers the standard deduction and the rebate under section 87A, assuming it remains unchanged,” said – Gaurav Gunjan, Partner at Gupta Sachdeva & Co., Chartered Accountants.
“We have high expectations for significant tax reforms in Budget 2024. Anticipated changes include revised income tax slabs to increase disposable income and stimulate consumer spending by raising the basic exemption limit and adjusting thresholds for higher tax rates,” said Kuljeet Singh, Director of finance and Accounts, GI Group Holding
NPS
Personal finance experts are increasingly calling for significant changes to the National Pension System (NPS), such as raising the additional income tax deduction limit under Sec 80CCD 1B. There is also a push to increase the tax-free withdrawal limit upon maturity, bringing it in line with other retirement savings schemes like EPF.
Abhishekh Soni, CEO and Co-founder of Tax2win, supports enhanced tax benefits, advocating for potential increases in contribution limits and improved withdrawal flexibility within the NPS framework.
Tax rate reductions
“Despite the changes introduced in Budget 2023 to incentivize taxpayers to switch to the new tax regime, the adoption rate has not met expectations,” remarked Divya Baweja, Partner at Deloitte India.
Baweja further suggested, “The government is anticipated to consider lowering the top tax rate from 30% to 25% within the new tax regime.”
Additionally, she noted, “There is also speculation that the government might raise the threshold for the highest tax rate from ₹10 lakh to ₹20 lakh under the old tax regime.”
As per Gaurav Gunjan, revised tax slabs under thenew regime (assumed):
• The exemption limit is ₹5 lakh.
• Taxable income between ₹5 lakh to ₹6 lakh is taxed at 5%.
• Taxable income between ₹6 lakh to ₹9 lakh is taxed at 10%.
• Taxable income between ₹9 lakh to ₹12 lakh is taxed at 15%.
• Taxable income between ₹12 lakh to ₹15 lakh is taxed at 20%.
• Taxable income above ₹15 lakh is taxed at 30%”
House Rent Allowance (HRA)
Abhishek Jain, a partner at Kailash Chand Jain & Co., highlighted the need for increased House Rent Allowance (HRA) exemptions to mitigate the impact of escalating rental expenses, especially in urban areas. This adjustment would lower taxable income and enhance affordability for individuals residing in rented properties.
Increase in the deduction limit for medical insurance premiums
Due to rising healthcare costs, there’s an expectation for an increase in the deduction limit for medical insurance premiums under section 80D of the Income Tax Act of 1961. Archit Gupta suggested that the current limits of ₹25,000 for individuals and ₹50,000 for senior citizens may be raised in the upcoming budget to ₹50,000 for individuals and ₹75,000 for senior citizens. Extending these benefits to the new tax regime would promote equal healthcare access and encourage greater adoption of health insurance.
Budget 2024: Finance Minister Sitharaman to present seventh budget in a row on July 23
The Union Budget for 2024-25 will be presented in Parliament on July 23. This will be Finance Minister Nirmala Sitharaman’s seventh consecutive budget.
Disclaimer: The views and recommendations made above are those of individual analysts, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.
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