Budget 2024 Expectations: What Salaried and Individual Taxpayers Hope to Hear from FM Nirmala Sitharaman Today

Finance Minister Nirmala Sitharaman will present the Union Budget 2024 today, July 23. As the Modi government starts its third term with a less decisive mandate, there’s speculation that reducing income tax could be a smart move for the ruling party. Salaried individuals, who play a big role in paying direct taxes, have several expectations from this budget. Let’s look at some of the key hopes they have for today’s budget announcement.

Changes to the New Income Tax Regime

The new tax regime offers lower tax rates for individuals compared to the old regime but removes many common deductions and exemptions. To make this new regime more appealing, it’s important to keep benefits like House Rent Allowance (HRA) exemptions, interest on housing loans, and deductions for employee contributions to Provident Fund (PF) and health insurance. Including these benefits in Budget 2024 would encourage investments and better tax planning for salaried people.

Increase the Standard Deduction for Salaried Taxpayers

The standard deduction for salaried individuals was reintroduced in Budget 2018 at Rs 40,000 and increased to Rs 50,000 in April 2020. There have been no changes since then. An indexed standard deduction, which adjusts for inflation, is suggested to help offset the rising cost of living in Budget 2024.

Changes to HRA Tax Exemption Calculation

Currently, HRA calculations consider only traditional metro cities. However, cities like Bengaluru, Hyderabad, Gurgaon, and Pune now have similar rental costs. Updating the criteria to include these cities and allowing them the 50% HRA exemption would reflect their growth and higher living costs.

Increase the Basic Exemption Limit from Rs 3 Lakh under the New Tax Regime

It’s expected that the government may raise the income tax exemption limit to Rs 5 lakh from the current Rs 3 lakh under the new tax regime. While the new tax regime is now the default, many employees still choose the old regime to take advantage of HRA exemptions and 80C deductions. Increasing the exemption limit to Rs 5 lakh under both regimes would benefit everyone. Similarly, raising the standard deduction from Rs 50,000 would also help.

Widen the Tax Slab for the 20% Tax Rate

Currently, a 30% tax rate applies to incomes over Rs 15 lakh. This rate should only apply to incomes over Rs 30 lakh. Widening the 20% tax slab would provide relief to the middle-income group, encouraging more consumption and savings.

Increase the Section 80C Deduction Limit and Include It in the New Tax Regime

The Section 80C limit was last revised in Budget 2014. With a wide range of investment options, the current Rs 1.5 lakh limit is low. Increasing this limit to at least Rs 2.5 lakh would benefit many taxpayers and is long overdue. Including this benefit in the new tax regime would encourage continued investments and adoption of the new regime.

Simplify Capital Gains Tax

Standardizing the taxation for all asset classes could simplify things. For example, applying a single 10% tax rate on long-term capital gains (LTCG) for all financial assets like equity shares, preference shares, and mutual funds, with a uniform holding period of over 12 months, would be a step in the right direction. Similarly, a consistent holding period of more than 24 months for all non-financial assets would help.

Increase Tax Benefits for Homebuyers

The current deduction for home loan interest has remained at Rs 2 lakh for the past decade. Given the rise in property prices and higher interest rates, it’s time to increase this limit. Doubling the home loan interest deduction to Rs 4 lakh would provide significant relief to homebuyers and boost the economy.

These are some of the key expectations salaried and individual taxpayers have from Budget 2024. They hope FM Nirmala Sitharaman will address these concerns in her announcement today.