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Interim Budget 2024: Key expectations among salaried taxpayers

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Salaried taxpayers are eyeing potential changes that could impact their finances as the nation anticipates the Interim Budget 2024

The interim budget will be presented by Finance Minister Nirmala Sitharman on February 1. 

Let’s look at some of the key expectations that the salaried taxpayers are hoping for in the Interim Budget of 2024-25. 

The pulse of the pay cheque

1. Standard deduction limit – Among the key expectations is a possible increase in the standard deduction limit from the existing Rs 50,000.

According to a report by Anand Rathi, a higher standard deduction is seen as a necessity for salaried taxpayers. The objective is to ease the tax burden in the middle and lower-income groups, especially those with limited investment options. 

The report highlights several reasons supporting the call for an increase in the standard deduction, a demand that has gained momentum, especially since the standard deduction was incorporated into the new tax regime last year.

2. Section 80C – Individuals are increasingly investing in eligible instruments under Section 80C, leading to a substantial rise in expenses on life insurance premium, tuition fees, and home loan principal repayments.

Taxpayers have long been hopeful for an increase in the limit beyond the current 1.5 lakh, considering the rising cost of living and retail inflation.

“With an increase in awareness, individuals are investing to a great extent in eligible instruments under Section 80C. The expenditure on life insurance premium, tuition fee, and principal repayment of home loans has also substantially increased. Hence, often, most individuals exhaust the limit of 1.5 lakh,” Rahul Charkha, Partner, Economic Laws Practice said.  

3. Section 80D- In the context of the pandemic’s impact on health, there is a call to increase the limit under Section 80D for health insurance.

Experts suggest raising the limit from Rs 25,000 to Rs 50,000 for individuals and from Rs 50,000 to at least Rs 75,000 for senior citizens. 

“Looking at the current scenario, where health insurance has played a major role in the pandemic, the Section 80D limit should be increased. It would be a win-win for the taxpayers as they will have more security and gain a tax advantage,” Charkha said. 

4. House Rent – The current deduction limit for house rent under Section 80GG, at Rs 60,000 annually, is considered inadequate due to rising residential prices.

Expectations are for a practical doubling of this limit to better align with current market conditions.

“At present, a person can claim a maximum deduction of Rs 60,000 under Section 80GG, at the rate of Rs 5,000 per month. With the increase in the prices of residential houses, this limit is unjustifiable. The limit should be practically doubled,” Charkha mentioned. 

5. Tax rebate increase – Tax rebate is also in focus, with expectations for an increase to Rs 7.5 lakh.

Mr. Prateek Bansal, Partner, Taxation & Regulatory, White & Brief Advocates & Solicitors, stressed that such an adjustment would provide much-needed relief to middle-income taxpayers, potentially boosting spending and investment.

However, he also stresses the need for comprehensive economic policies beyond just tax rebates for long-term economic growth.

6. Home loan tax benefit – Homebuyers are seeking changes in Section 24(b), which currently limits the deduction for interest on home loans to Rs 2 lakhs.

Experts argue that, given the surge in loan amounts, interest rates, and real estate prices, this cap is no longer sufficient, and expectations are for a more flexible stance.

7. Capital Gain – The budget also faces calls to reconsider the capped deduction under Sections 54 and 54F for capital gains, which was limited to INR 10 crores in Budget 2023. 

“Budget 2023 capped the deduction under Sections 54 and 54F to Rs 10 crores. Restricting the deduction to Rs 10 crores is contradictory with the reduction in the highest rate of tax from 42.74 per cent to 39 per cent. It is a violation of the fundamental rights of such taxpayers by restricting them to claiming deductions on legitimately earned capital gains. The Government may consider withdrawing such restrictions in Budget 2024.”

8. New vs Old Tax Regime – The union budget for 2023-24 provided additional benefits to the new income tax regime. Expectations are rising that the old regime might receive some benefits this year. 

“Taxpayers opting for the old tax regime are expecting the limit of rebate to be increased to at least INR 7 lakhs. Whereas taxpayers opting for the new tax regime are expecting the introduction of deductions in the regime for repayment of home loan and medical expenditure,” Charkha explained. 

source by: India Today News

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