Budget 2024: A wishlist for the common man; here’s what to look forward to

‘Budget 2024’, to be presented on February 1, 2024 will be an interim budget and would enable the Government to manage its revenue and expenditure until a new government is elected in the Parliamentary elections due to be held later this year. The Finance Minister, Nirmala Sitharaman has already indicated that the interim budget will be devoid of any "spectacular announcements". Hence the expectations of any significant changes are low.    

However, given that the economy has done well in an otherwise inflationary environment, some changes may still be announced to provide for removing anomalies if any in existing provisions and increasing savings in the hands of the common taxpayer. Some of these possibilities have been discussed in this article.    

The current rates of tax on various taxpayers are at relatively moderate levels. The Government had also introduced a new simplified tax regime for individuals in the previous budget. Therefore, it is unlikely that the Government will introduce any drastic changes in tax rates, especially for individual taxpayers. However, the maximum rate of surcharge of 25 per cent applicable to individuals is considered as being on the higher side by many stakeholders. While this rate is only applicable to individuals in the highest tax bracket, the Government may consider reducing this rate in order to bring down the maximum rate applicable to individuals.   

The Government is also likely to extend the beneficial tax rate of 15 per cent for new manufacturing companies beyond the current period of March 2024. This would go be consistent with the policy of promoting Make in India.   

As a matter of policy, the Government has gradually moved away from incentivising investment linked deductions. Limit of Rs 1,50,000 placed on these is already considered low given the rising income levels and inflation. However, it has also resulted in degrowth in domestic savings rate. To overcome that, the Government may consider increasing limits for investments which are linked to the stock markets, such as mutual funds, Unit Linked Insurance Plans, and ETFs. Further, increasing the limits available for deductions towards health insurance premiums paid by individuals may also be considered given the increase in medical costs. Currently, these deductions are limited to Rs 25,000, which is increased to Rs 50,000 in case of senior citizens.   

Given the heavy infrastructure push being planned across the country, the Government may also consider increasing avenues for public funding of infrastructure projects. Individuals are currently permitted investments upto Rs 50 lakhs into NHAI bonds for claiming exemptions from capital gains tax payable on sale of property. Given the rise in property prices, the general inflation rates, and to provide an impetus to indirect infrastructure funding, the Government may consider increasing this limit to Rs 1 crore (or at least Rs 75 lakh).   

Currently, high home loan interest rates coupled with limit of Rs 200,000 on deduction of interest paid on loans taken for self-occupied property has adversely affected the first-time homeowners. This could potentially help mitigate the increasing finance costs.   

Investors today are subject to ‘securities transaction tax’ as well as long-term capital gains tax of 10 per cent on sale of listed shares. While these may seem unjust to public given the historical background of imposition of STT, the Government may not be incentivised to tweak these rates in this interim budget. 
  
It would be interesting to see the approach to be adopted by the Government and the extent of changes that would it seek to make in the tax laws just before the Parliamentary elections. 

Views are personal. The authors are with JSA Advocates & Solicitors 

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