The budget announced on February 1 is interim and set to expire by May, when general elections are scheduled. While Nirmala Sitharaman, the finance minister, has stated that the interim budget will contain “no spectacular announcements,” some adjustments cannot be completely ruled out.
After all, the tax rebate was raised for people with incomes up to Rs 5 lakh in the February 2019 budget, which was also an interim one after the current government’s first term. Because of this, individuals earning up to Rs 7 lakh could still avoid paying taxes if they claimed deductions totalling at least Rs 2 lakh, which would reduce their taxable income to less than Rs 5 lakh (including the standard deduction of Rs 50,000).
Budget 2024 and the Taxpayer
The following are the demands on Budget 2024 from mutual funds, the pension and insurance industries, and taxpayers:
- Greater basic exemption limit: An increase in the basic exemption limit will lower the tax liability across slabs, that is, for all taxpayers, in contrast to the tax rebate, which is available on incomes up to Rs 5 lakh and Rs 7 lakh under the old and new tax regimes, respectively.
- Increased medical expense deductions: In light of the growing cost of healthcare, taxpayers are hoping for a rise in the allowable amounts for medical expenses and health insurance premium payments. At the moment, taxpayers can deduct up to Rs 25,000 annually from their taxes for parents and their families health insurance premiums paid under Section 80D. For senior citizens, the maximum deduction is Rs 50,000.
- Equity between self-employed professionals and salaried taxpayers: Following the new tax system in Budget 2020, taxpayers can switch from the previous tax system to a new one with lower tax rates and fewer deductions. While self-employed people and businesses can enter the new tax regime and switch back to the old one once in their lifetime, salaried individuals can choose between the two tax regimes every financial year.
- Income from annuities is tax-free, and life insurance is tax-deductible separately: Raising the tax-free cap on employers’ contributions to the National Pension System to 12 per cent of basic pay and dearness allowance, if any, is what the Pension Fund Regulatory and Development Authority is advocating for. Currently, it is only 10 per cent for workers in the private sector. The cap is already higher for those who work for the government, at 14 per cent. Employers may deduct this from their business expenses, and employees may take advantage of this deduction on their employers’ contributions.
- Tax breaks on home loans under the new regime: Real estate stakeholders want more deductions for interest payments than they could under the previous tax system. Since 2014, this has stayed constant at Rs 2 lakh.