Budget 2024: Here’s how your personal tax rules can be affected; check details here

 

We are a few days away from the upcoming Union Budget 2024 which will be presented on 1 February 2024 by our Honourable Finance Minister, Ms. Nirmala Sitharaman, marking her sixth consecutive year in this role.

Let us look at some key income tax expectations around personal tax from Budget 2024:

1. Increase in basic exemption limit

While the government did bring in many modifications in Budget 2023, it is expected that the budget could likely raise the basic exemption limit by at least Rs 50,000 under both the regimes.

An increase in basic exemption limit will reduce the tax liability across all taxpayers, thereby increasing the net take home.

2. Parity in deduction allowed for contribution to National Pension Scheme

Currently, an employee is allowed deduction of the whole of the contribution made during the financial year into notified a pension scheme to the extent it does not exceed:

• 14% of salary, where such contribution is made by central or state government employees
• 10% of salary, in case of other employees

This creates disparity between government and private sector employees. Hence, it is expected that the private sector employees should also be allowed deduction to the extent of 14% of salary in line with the government sector employees.

3. Increase in standard deduction

Under the current Income Tax provision, a standard deduction of Rs 50,000 is allowed to a salaried taxpayer under both old and simplified tax regime. With the increase in the cost of living, it is expected that the Government should consider increasing the standard deduction for salaried employees from Rs 50,000 to Rs 1,00,000.

4. Bengaluru, Hyderabad and Pune to be considered as metro cities for the purpose of House rent allowance (“HRA”) exemption under Section 10(13A)

Currently, the Income Tax provisions, consider only Delhi, Mumbai, Chennai, and Kolkata to be metro cities for the purpose of section 10(13A). One of the conditions to compute HRA exemption for the above-stated metro cities is 50% of the basic salary.

Bengaluru, Hyderabad and Pune being among the fastest growing cities provides employment to many. Further, there is an increase in the cost of living in these cities. Hence, it is suggested that Bengaluru, Hyderabad and Pune be considered as a metro city to enable employees to get a deduction which is at par with the above-stated metro cities i.e. one of the conditions to compute HRA exemption to be 50% of basic salary as against 40% of basic salary based on current provisions.

5.Simplify the TDS compliance for home buyers where the seller is an NRI

According to the current provisions, 1% of the purchase value needs to be deposited as TDS in case of resident home seller with the government, where the property value is Rs 50 lakhs or more. The requirements to deposit tax are more complex if the seller is a Non-Resident Indian (NRI). While the TDS process is simple and convenient if the seller is a resident, in case of an NRI, the tax is deducted at a higher rate and the buyer is also required to obtain a TAN, deposit the tax, and file e-TDS returns. Hence, it is suggested to introduce a simple TDS process that is similar to that of a resident seller.

Views are personal. The author is Partner with Deloitte India.

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