Union Budget 2024: 7 Income Tax reliefs highly expected from FM Nirmala Sitharaman on July 23

Budget expectations: The forthcoming presentation of the Union Budget 2024 by Finance Minister Nirmala Sitharaman on July 23 has piqued the keen interest of the salaried class. Their expectations are centered around the anticipation of favorable announcements, particularly focusing on tax reductions and reforms aimed at simplifying and optimising taxation processes.

Salaried taxpayers are hopeful for lower income tax rates to mitigate the impacts of inflation and the surge in interest rates. They are also looking forward to incentives that encourage equity investments, including tax exemptions, which would ultimately result in increased disposable income for individuals. Furthermore, there is a collective expectation for the implementation of a more transparent tax structure and an expansion of tax exemptions within the upcoming budget.

Top expectations of the salaried class from the Union Budget 2024:

1. Adjustment of tax slabs

The revision of income tax slab rates is a widely anticipated measure that could result in a more equitable and progressive tax system. This potential adjustment may lead to reduced tax burdens for individuals belonging to the middle-income group. Furthermore, under the new tax regime, the maximum surcharge rate is currently set at 25%, a significant decrease from the 37% in the previous tax structure. It is plausible that the advantages provided by the new tax system could be extended to encompass the old tax framework as well.

2. Revamp of Section 80C

The salaried class is expecting the government to deliberate on the proposal of elevating the deduction limit specified under Section 80C of the Income Tax Act. This adjustment is deemed necessary to extend support to the middle-class segment of taxpayers. Notably, the deduction threshold has remained stagnant at Rs 1.5 lakh since FY2014-15, signifying an overdue necessity for recalibration. The deduction provided under this section is widely acknowledged as a pivotal tax advantage for individual taxpayers within the prior tax framework. Against the backdrop of escalating living expenses, amplifying the deduction limit to a minimum of Rs 2 lakh from the current Rs 1.5 lakh would yield substantial respite to a significant portion of the salaried workforce.

3. Increase in Standard deduction

In the Union Budget 2018, a standard deduction of ₹40,000 per year was reintroduced for the salaried class. Subsequently, in the Interim Budget 2019, the standard deduction limit was raised to ₹50,000. Since then, the standard deduction amount has stayed constant. There is speculation that the Finance Minister might contemplate further increasing the standard deduction to as much as ₹1 lakh annually.

4. New Tax Regime rejig

It is imperative to analyze the potential expansion of tax deductions for individuals transitioning from the Old tax regime to the New tax regime. By extending benefits such as health insurance and NPS contributions, there is an opportunity to enhance healthcare accessibility and encourage financial planning and investments for taxpayers.
 

Income Tax Slabs	Income Tax Rates
Up to Rs 3 lakh	Nil
Rs 3 lakh to Rs 6 lakh	5% (Tax rebate u/s 87A)
Rs 6 lakh to Rs 9 lakh	10% (Tax rebate u/s 87A up to Rs 7 lakh)
Rs 9 lakh to Rs 12 lakh	15%
Rs 12 lakh to Rs 15 lakh	20%
Above Rs 15 lakh	30%

Furthermore, there have been suggestions from experts regarding the reduction of the top tax rate within the new tax regime from 30% to 25%. Additionally, considerations have been proposed to elevate the income threshold for the highest tax bracket from ₹10 lakh to ₹20 lakh under the previous tax regime.

5. Old Tax Regime

In the Union Budget 2023, adjustments were made to the new personal tax regime. In the upcoming Budget, there are expectations for significant improvements in the structure of the Old Tax Regime slab. One of the anticipated changes may include an increase in the income tax exemption limit to Rs 5 lakh to match the New Tax Regime. The NDA government is likely to simplify tax slabs and decrease rates to alleviate the burden on individual taxpayers. Presently, under the new regime, tax rates vary from 5% to 30% based on income levels.

6. Hike in HRA

House Rent Allowance (HRA) is a component of salary provided by employers to employees for meeting their accommodation expenses. It is a tax benefit available to salaried individuals who reside in rented housing. The HRA exemption is determined by considering factors such as the actual rent paid by the individual, their basic salary, and the location of the residence.

HRA serves as a crucial exemption for the salaried class who reside on rental accommodations, particularly in cities that are not their hometown. Currently, the formula for claiming this exemption designates only four cities – Chennai, Mumbai, Delhi, and Kolkata – as eligible for a 50% of salary basis for HRA exemption. Conversely, all other locations are entitled to a 40% of salary basis for the exemption.

In the present day, cities like Bengaluru, Hyderabad, Gurgaon, and Pune have become equally high priced. Therefore, there is a growing anticipation that the HRA rules will be revised in Budget 2024 to encompass these cities for HRA exemption with a basis of 50% of salary.

7. Raising threshold for section 80TTA

Salaried individuals frequently allocate their funds into different savings and term deposit accounts to optimize their earnings. This practice raises the question of whether the government should contemplate encompassing the interest gained from diverse bank deposits, including fixed deposits, within section 80TTA. Moreover, increasing the threshold for this incorporation from Rs 10,000 to Rs 50,000 could potentially yield advantageous outcomes.