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. Anticipations include a potential hike in the standard deduction, relief in income tax rates, and an increase in Section 80C exemptions. Tax experts foresee 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.
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.
Section 80C Exemption:
Salaried persons can use Section 80C exemptions to reduce their taxable income by ₹1.5 lakh in a fiscal year. Revising the Section 80C limit, which has remained unchanged since 2014 despite escalating inflation rates, would aid taxpayers in managing inflation and encourage savings and investments in essential financial instruments such as ELSS, tax saver FDs, and PPF.
Increase Income Tax Exemption Limit:
Various media reports indicate 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.
National Pension System (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.
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. The government is anticipated to consider lowering the top tax rate from 30% to 25% within the new tax regime.
House Rent Allowance (HRA):
Increased House Rent Allowance (HRA) exemptions are expected 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.
Also read: ITR Filing: Will Income Tax Department Extend July 31 Deadline Due to E-Filing Glitches?
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.