Finance Minister Nirmala Sitharaman is on the verge of presenting her seventh budget, marking her first under ‘Modi 3.0’. Salaried taxpayers are eagerly anticipating potential tax relief measures. According to various media reports and experts, the government, led by Prime Minister Narendra Modi, might introduce populist measures that could include tax relief for salaried individuals.
The government aims to announce measures that favour salaried taxpayers to boost middle-class consumption. However, there is also a focus on consolidating the fiscal deficit and meeting the target for FY24.
Anticipated Tax Relief Measures for Salaried Taxpayers
Income Tax Thresholds
Experts are advocating for an increase in income tax thresholds. “Specifically, income below Rs.5 lakh should be exempt, income between Rs. 5 lakh to Rs 12 lakh should be taxed at 10%, income between Rs 12 lakh to Rs 20 lakh at 20%, and the highest slab of 30% should apply to income above Rs. 20 lakh,” said Ankit Jain, Partner, Ved Jain & Associates.
Section 80C Limit
An increase in the deduction limit under Section 80C has been a recurrent suggestion and could significantly help taxpayers save more money. “The Rs 1.5 lakh limit should be increased to Rs 2 lakh or 2.5 lakh at a bare minimum. This would help savings as well as curb inflationary pressure to some extent in the country,” said Dipesh Jain, Partner, Economic Laws Practice.
Standard Deduction
Currently, a standard deduction of Rs 50,000 is applicable under both the old and new income tax regimes. Experts believe this limit should be increased. “There is an increasing demand to enhance the standard deduction of Rs.50,000 to a higher level since the limit has been untouched since 2019. This will help a lot of taxpayers who are currently feeling very disheartened by the inflation rise and low salary increases,” said SR Patnaik, Partner, Cyril Amarchand Mangaldas.
Housing Loan Deduction
“The interest deduction allowed on housing loans has been capped at Rs 2 lakh for a few years. An increase in this cap to, say, Rs 3 lakh would be a very welcome move for individuals,” said Ritika Nayyar, Partner, Singhania & Co. She further added that it would be more beneficial if this deduction is provided separately and not clubbed with 80C. “The deduction for housing loan interest should be increased. With the steady rise in housing costs, it is challenging to find even a 1BHK house for less than Rs. 50 lakhs in urban areas. Hence, the current deduction of Rs. 2,00,000 for self-owned houses is insufficient and unfair,” said Ankit Jain.
Simplification of Capital Gains Tax
Capital gains are considered the most complex category of income under the Income-tax Act due to numerous amendments over the years. There are different timeframes for various assets to be classified as long-term or short-term, and multiple base tax rates such as 10%, 15%, 20%, 22%, 30%, and 40%. “Additionally, there are varied surcharge rates, qualifications for indexation or currency fluctuation benefits, and eligibility for certain deductions under the section 54 series, among other complexities. Simplifying the capital gains tax system and rationalising the tax rates would be greatly beneficial,” said Dipesh Jain.
As we approach the announcement of Budget 2024, salaried taxpayers are hopeful for substantial tax relief measures. With the potential changes in income tax thresholds, Section 80C limits, standard deductions, housing loan deductions, and capital gains tax simplification, there is a strong expectation that the government will take steps to ease the financial burden on the middle class.
Stay updated with the latest budget announcements to understand how these changes might affect you. Ensure your financial planning aligns with the new regulations to maximise your benefits.
