Income Tax Expectations and Anticipated Reforms in Budget 2024
As the eagerly awaited date of July 23rd approaches, expectations for Budget 2024 are escalating, with all eyes on Finance Minister Nirmala Sitharaman’s upcoming presentation. Anticipation is mounting for potential revisions to the income tax structure, including adjustments to standard deduction, relief in income tax rates, and an increase in Section 80C exemptions.
Standard Deduction:
Salaried employees are hopeful for a possible increase in the current standard deduction, which stands at ₹50,000. Ashish Aggarwal, Director at Acube Ventures, projects a moderate rise to ₹60,000 or even ₹70,000, which would effectively lower taxable income for this group of taxpayers.
Section 80C Exemption:
The call to revise the Section 80C limit, currently set at ₹1.5 lakh, has gained traction. Archit Gupta, Founder and CEO of ClearTax, emphasized the importance of adjusting this limit to combat inflation and promote savings and investments in essential financial instruments.
Income Tax Exemption Limit:
Reports suggest a potential increase in the income threshold before imposing any tax, from the current ₹3 lakh to ₹5 lakh. This adjustment could result in individuals with an annual income of up to ₹8.5 lakh potentially paying no income tax. Gaurav Gunjan, Partner at Gupta Sachdeva & Co., Chartered Accountants, outlined the potential impact of this change, taking into consideration the standard deduction and the rebate under section 87A.
Tax Reforms:
Anticipation is high for significant tax reforms in Budget 2024, as noted by Kuljeet Singh, Director of finance and Accounts, GI Group Holding. Speculated changes include revised income tax slabs to increase disposable income and stimulate consumer spending, as well as adjustments to the National Pension System (NPS) and potential tax rate reductions.
National Pension System (NPS):
Experts are advocating for substantial changes to the NPS, such as raising the additional income tax deduction limit under Sec 80CCD 1B and increasing the tax-free withdrawal limit upon maturity. These adjustments aim to align the NPS with other retirement savings schemes and enhance its attractiveness to taxpayers.
Tax Rate Reductions:
Divya Baweja, Partner at Deloitte India, highlighted the unmet expectations regarding the adoption rate of the new tax regime introduced in Budget 2023. Speculation surrounds the possibility of the government considering a reduction in the top tax rate from 30% to 25% within the new tax regime, alongside raising the threshold for the highest tax rate from ₹10 lakh to ₹20 lakh under the old tax regime.
Other Expected Reforms:
Additional suggestions include an increase in House Rent Allowance (HRA) exemptions, an extension of the deduction limit for medical insurance premiums, and the equalization of benefits across tax regimes for comprehensive healthcare access.
As Finance Minister Nirmala Sitharaman prepares to present her seventh consecutive budget on July 23, the hopes and expectations of taxpayers and experts alike remain high for substantial reforms in Budget 2024. Taxpayers and investors are advised to consult certified experts before making any investment decisions.
Disclaimer: The views and recommendations mentioned are those of individual analysts and not of Mint. We advise investors to seek advice from certified experts before making any investment decisions.
