Experts believe that adjustments to income tax slab rates could be seen in the Budget 2024.
Finance Minister Nirmala Sitharaman is gearing up to present the Union Budget on July 23. Taxpayers are eagerly anticipating several potential changes, including a hike in the standard deduction, relief in income tax rates, and an increase in Section 80C exemptions. Experts suggest that we might see adjustments to income tax slab rates, with possible tax reductions on the horizon. Here’s what you can expect regarding income tax changes in the upcoming Budget.
1. Standard deduction:
The standard deduction was initially introduced at ₹40,000 in the 2018 budget. It was later increased to ₹50,000 in the 2019 budget and has remained unchanged since then.
2. Section 80C exemption:
A much-needed revision in the Section 80C limit has been long overdue, remaining unchanged since 2014 despite rising inflation rates. Updating this limit would help taxpayers combat inflation while stimulating savings and investments in essential financial instruments like ELSS, tax saver FDs, and PPF. This aligns with the broader vision of a financially robust and prosperous India.
3. Income tax exemption limit:
In the upcoming budget, the finance minister may raise the income threshold for imposing any tax from ₹3 lakh to ₹5 lakh. This change will particularly impact taxpayers filing under the new tax regime.
4. National Pension System:
Changes in the National Pension System (NPS) could be on the horizon, including an increase in the additional income tax deduction limit under Section 80CCD (1B).
5. Tax Rate reductions:
The government may lower the top tax rate from 30% to 25% under the new tax regime. Additionally, the finance minister might raise the threshold for the highest tax rate from ₹10 lakh to ₹20 lakh under the old tax regime, according to experts.
6. House Rent Allowance (HRA):
The Budget may include increased House Rent Allowance (HRA) exemptions to help mitigate the impact of rising rental expenses, particularly in urban areas.
7. Simplification of Capital Gain tax:
India’s current capital gains tax structure is complex, featuring multiple rates based on the type of capital asset and holding period. The finance minister is expected to introduce changes to simplify this tax structure in the upcoming budget.
8. Deductions for Housing Loan Interest under NTR:
Aligned with the government’s objective of housing for all, it is widely anticipated that tax incentives may be introduced for housing and funding costs for middle- and low-income earners. This could include allowing deductions for interest on self-occupied housing loans under the new tax regime.
9. Reclassification of Bangalore as a Metro City:
With Bangalore’s significant economic and demographic growth, reclassifying it as a metro city for income tax purposes is crucial. Currently, its non-metro status limits HRA deductions to 40%, whereas other metro cities enjoy a 50% deduction.
10. Increase in Interest Deduction Limit under Section 24(b):
To further promote homeownership, the government should consider raising the interest deduction limit under Section 24(b) from ₹2,00,000 to ₹3,00,000. This adjustment would offer added incentives for purchasing residential properties, benefiting both individual financial health and the broader real estate market.
11. Rebates under 87A:
The rebate under Section 87A should be extended to cover incomes up to ₹6.3 lakh, aligning with the last update made in 2019. This increase would provide greater relief to taxpayers, reflecting adjustments for inflation and changing economic conditions since the previous revision.
12. Raising deduction limit of interest income:
As the Union Budget 2024 presentation by Finance Minister Nirmala Sitharaman approaches, the government is considering a proposal to increase the tax-deductible limit on interest income from savings accounts to ₹25,000. This proposal was suggested by banks during a recent meeting with finance ministry officials.
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