What can we expect from the 2024 Union Budget? – 2024 Budget News

By- Preeti Gupta

The start of the federal budget season draws the attention of individual taxpayers. Expectations for the 2024 budget are no different. Once again, individual taxpayers are crossing their fingers, hoping for income-tax relief in this highly inflationary environment.

In recent years, the government’s focus has been on facilitating compliance, reducing litigation and improving the overall efficiency of tax administration in India. As a result, a simplified New Tax Regime was introduced in 2020. Since then, the government has brought in several changes to make the new tax regime more attractive to taxpayers, such as a higher basic exemption limit of INR 3 lakh, wider tax brackets, reduced surcharge of 25% on income above INR 5 crore, allowing standard deduction and increasing the rebate. The government is expected to introduce more changes in the new tax regime to make it even more attractive to taxpayers who are still opting for the old tax regime. This may involve further relaxing the brackets, widening them or restructuring them. Currently, the tax rate of 30% is applicable on income above INR 15 lakhs. This may be increased to INR 20 lakh.

Increasing the limit under Section 80C has been a long-standing demand of taxpayers and financial experts in India. Section 80C allows individuals to claim deductions from their taxable income by investing on specified instruments and expenses. The current limit of INR 1.5 lakh has remained unchanged since 2014 despite inflation and rising cost of living, prompting calls for a review. To encourage savings and investment and keep pace with inflation rates, the government may consider increasing the deduction limit under Section 80C from INR 1.5 lakh to at least INR 2 lakh.

In the same vein, the existing standard deduction of Rs. 50,000 does not adequately cover the rising cost of living and can be increased to Rs. 1 lakh-1.25 lakh, which will be a significant relief for salaried taxpayers.

Healthcare expenses, including insurance premiums, have been rising rapidly. Section 80D allows individuals to claim deductions for health insurance premiums paid by themselves, their spouses, children and parents. In the current scenario, a deduction of up to INR 25,000 is allowed for premiums paid by oneself, spouse and dependent children. An additional deduction of up to INR 25,000 (INR 50,000 in case of senior citizens) is allowed for premiums paid by parents. An increase in the Section 80D limit in the Union Budget would enable taxpayers to buy higher coverage health insurance policies, ensuring better financial protection against medical emergencies. Additionally, bringing the medical insurance premiums to a lower level Tax on goods and services the tax rate bracket (currently 18%) would make the service more affordable.

The rule for exemption from the housing rent allowance (HRA) under the Income tax The Act is indeed a hot topic and has been the subject of several discussions and proposals for revision. The existing HRA exemption limit was defined decades ago and requires a revamp due to the fact that rent payments in recent times have been skyrocketing in both metro and non-metro cities. Currently, only Chennai, Delhi, Kolkata and Mumbai qualify as metro cities eligible for HRA exemption of 50% of salary. However, rents in other major cities like Gurgaon, Bangalore, Hyderabad, etc. have increased significantly in recent times. Therefore, it is high time that other major cities are also included in the definition of metro cities to qualify for exemption of 50% of salary.

The real estate sector plays a crucial role in economic growth through employment generation and infrastructure development. With property prices and interest rates constantly rising, homebuyers incur substantial interest payments. Increasing the deduction limit under Section 24(b) from Rs. 2 lakh to at least Rs. 3 lakh would provide financial relief and make home ownership more feasible. Additionally, Section 80EEA provides an additional deduction of up to Rs. 1.5 lakh on interest paid on home loans sanctioned between April 1, 2019, and March 31, 2022, for first-time homebuyers in the affordable housing segment. The government may plan to reintroduce the benefit under Section 80EEA by March 2026 to give a much-needed boost to the affordable housing segment.

Overall, individual taxpayers have high hopes for the upcoming budget proposals, hoping that they will provide some relief to their pockets. It remains to be seen what the government brings to the table to manage the expectations of individual taxpayers.

(Preeti Gupta is with Deloitte Haskins & Sells LLP)

(Disclaimer: The views expressed are personal and do not reflect the official position or policy of Financial Express Online. Reproduction of this content without permission is prohibited.)

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