BUDGET 2024: With the Economic Survey 2024 highlighting that tax policies will have a major role to play in tackling income inequality in the coming years, it is left to be seen what Union Finance Minister Nirmala Sitharaman can bring to the table in terms of tax relief. Ahead of the Union Budget 2024, taxpayers are eagerly anticipating updates on exemptions and deductions in both tax regimes. Experts too are expecting some kind of relief in term of direct taxes.
What to expect from Budget 2024
Standard deduction: Under the revision to tax regulations, it is expected to see an increase in the standard deduction. This adjustment aims to provide relief to individuals in the middle-income bracket.
Punit Shah, Partner, Dhruva Advisors, said: "It is recommended that the government introduces amendments with an effort to stimulate consumer spending - key expectations include raising the tax-free income threshold, reducing tax rates for middle-income earners, increasing the standard deductions for salaried employees, enhanced limits for Section 80C (investment-related deductions), and higher deductions under Section 80D for health insurance premiums. These measures aim to boost disposable income, aligning with inflation rates and encouraging higher consumer expenditure to invigorate the economy."
Tweaks in tax slabs: A potential restructuring of tax slabs is being considered to create a fairer and more balanced tax system for middle-income earners.
Mayank Bhatnagar, Co-founder and COO, FinEdge says, "On the personal income tax front, we expect the basic limit of tax exemption to be increased to 5,00,000 from Rs 3,00,000 under the new tax regime. We could also see an increase in the limit of standard deduction thereby increasing more money in the hands of the taxpayer. The government could also consider an increase in tax exemption limit under Section 80C and Section 80D."
Chander Talreja, Partner, Vialto Partners says, “This year, the government may provide relief to middle income level individuals by tweaking the slab rates further and introducing additional slabs for income ranging between Rs 15 lakh and Rs 20 lakh."
Tax slabs proposed by Talerja
Up to Rs 3 lakh: Nil tax
From Rs 3 lakh to Rs 6 lakh: 5% tax rate
From Rs 6 lakh to Rs 9 lakh: 10% tax rate
From Rs 9 lakh to Rs 12 lakh: 15% tax rate
From Rs 12 lakh to Rs 15 lakh: 20%
From Rs 15 lakh to Rs 20 lakh: 25% tax rate
Rs 20 lakh and above: 30%
Single tax regime: There is also a demand to have a single tax regime. The government is currently contemplating the implementation of a 'single hybrid tax regime'. There is anticipation that the exemption threshold in this new regime could potentially be raised from the existing Rs 3 lakh to a minimum of Rs 4 lakh.
Vivek Jalan, Partner Tax Connect Advisory Services LLP, said: "The government may move towards a 'single hybrid tax regime' as the new taxpayers are already in the new tax regime. It is expected that the exemption slab in the new regime may be extended from the present Rs 3 lakh to Rs 4 lakh at least. Further, the established taxpayers with an income of over Rs 15 lakh, still continue to embrace the old regime. It is expected that the government would also incentive them to shift to the new regime. Hence there may be a new slab in the new regime of say Rs 15 lakh to Rs 18 lakh with a tax rate of 25%."
NPS additions: The forthcoming budget is expected to implement measures to ensure secure pension benefits for participants in the National Pension System (NPS), enhancing financial stability for retirees.
New Tax Regime: In the new tax regime, additional incentives are expected to be incorporated to make the revised tax system more appealing and encourage compliance among taxpayers. This is intended to create a more efficient and compliant tax environment.
Real estate: Forecasts suggest that support for middle-class homebuyers will be enhanced through various programmes aimed at streamlining the home-buying process. These initiatives aim to improve access to affordable housing options for the middle-class population.
Avneesh Sood, Director of Eros Group, said: "While industry status for real estate and revived incentives for affordable housing remain key expectations, a nuanced approach is crucial. Beyond fiscal incentives, the budget should focus on enhancing transparency and efficiency through a robust regulatory framework and streamlined approvals process. Introducing innovative financing mechanisms, such as green bonds tailored for sustainable urban development, could align economic growth with environmental stewardship. Moreover, there’s a pressing need to revisit GST input tax credit rules to mitigate cost burdens and bolster market transparency."
Akash Pharande, Managing Director of Pharande Spaces says, "Tax breaks are critical when it comes to making homeownership more approachable, and they can also encourage builders to take on new affordable housing projects"
Here are the measures proposed for real estate:
1) Raise tax deduction for home loan interest: Raising the tax deduction limit under Section 24(b) of the Income-tax Act, 1961 is long overdue and the need of the hour. The deduction limit should be increased from the current Rs 2 lakh to at least Rs 3 lakh or even more.
2) Reduce stamp duty: The government can encourage state governments to cut their stamp duty rates, which account for a significant portion of the cost of homeownership. Even a temporary decrease or waiver of stamp duty on affordable and lower-middle-income housing can boost demand and sales.
3) Incentives for first-time buyers: First-time homebuyers should get further sentiment boosters. For instance, the government can raise the deduction limit under Sections 80EE and 80EEA for such buyers.
4) GST Reforms For Developers: GST rates applicable on construction materials and services can help lower overall project costs for builders. Also, a reduced GST rate for affordable housing projects would help attract more builders to this vital segment and to pursue such projects.
Capital Gains Tax restructuring: There is a current and increasing anticipation for modifications to be implemented within the capital gains tax structure, specifically in relation to stocks and real estate. The streamlining and uniformity of this taxation system hold the capacity to notably impact investors and the collective economy.
"Simplification of capital gains tax structure is required. At present, the structure is complicated due to multiple factors such as varied rates of tax, holding period to qualify as long-term/ short-term, residential status of the taxpayer etc. Simplified capital gains tax structure may help enhance compliance by the taxpayers and reduce administrative burden on tax authorities to verify multiple fact points for computation of capital gains and taxes," said Shalini Jain, Tax Partner, EY India.
Kirang Gandhi, Personal Financial Mentor, K.Gandhi and Associates, said: "In the 2024 Budget, personal tax reforms are anticipated, with a potential increase in the basic exemption limit and adjustments to tax slabs to provide relief to middle-class taxpayers. Capital gains tax restructuring might be on the agenda to simplify and possibly reduce rates. The insurance and healthcare sectors expect increased deductions for premiums and enhanced funding for health infrastructure."
Anita Basrur, Partner- Direct Tax, Sudit K Parekh & Co. LLP, said: "Investors are expecting some good relief in the Budget 2024 as far as taxation of capital gains is concerned. They are of the view that rationalisation is long awaited and is the need of the hour. There is an expectation of increase in the LTCG limits from the existing Rs 1 lakh. There are different rates of taxation for different types of stocks / assets. there is an expectation of rationalisation in the rates. Further, investors have to bear multiple layers of tax such as STT, GST, income tax etc. It is expected that an all inclusive tax rate will make it easier for investors / tax payers. Also the time period for LTCG is different for different assets making it confusing and difficult. This should also be looked into."
Shailesh Dhuri, CEO, Decimal Point Analytics, said: "The upcoming Budget session is poised to unleash the potential of our economy by cutting red tape, increasing trade opportunities, and reforming state-owned enterprises. This Budget will streamline the tax code, boost investment in infrastructure, and strengthen education and healthcare. It will further empower the most vulnerable by providing universal health coverage, targeted cash transfers, and microfinance opportunities, alongside critical rural infrastructure improvements