Expectations for the budget: On February 1st, Finance Minister Nirmala Sitharaman is scheduled to read the Interim Budget statement covering the first three months of the upcoming fiscal year. Until the Lok Sabha elections are held and a new government is established, the interim budget will remain in effect. It is planned that the comprehensive budget will be presented in July. The general public, particularly taxpayers, have high expectations despite the constraints of this Budget, and they want FM Sitharaman to address some of them in the interim statement.

Here are some of the demands:

1. Improvement in Tax Slabs

A possible tax cut is one of the primary requests of the taxpayers. Many are hopeful that the Centre will take action to lessen households' financial burden as rising costs and inflation continue to have an impact on them. The common individual is also quite interested in the income tax slab because many hope that changes will be made that will result in lower tax responsibilities or more income bands.

"Health concerns and conflict-like conditions have altered the global landscape in recent years. As a result, countries all over the world reviewed their tax laws and offered tax breaks to help people maintain their jobs and businesses stay afloat. Nevertheless, middle-class Indians received no tax reductions. To alleviate our taxpayers of the burden of excessive tax rates, it would only be just to make adjustments to the income tax slabs in the next budget. The present government's interim budget notwithstanding, taxpayers have a right to anticipate a decrease in tax rates," as per the Rahul Charkha, partner at Economic Laws Practice.

2. Tax rebate and Exemption Limit

For assessees choosing the new direct tax regime, FM Sitharaman raised the threshold for income-tax refunds from Rs 5 lakh to Rs 7 lakh last year. Additionally, the basic exemption amount was raised from Rs 2.5 lakh to Rs 3 lakh. Additionally, the Centre instituted a Rs. 15,000 family pension deduction. The standard deduction clause was implemented in Budget 2023 for salaried individuals, retirees, and family pensioners under the new tax regime. Pensioners and salaried workers presently receive a standard deduction of Rs 50,000 under the previous tax system.

"It is anticipated that the tax rebate may rise to Rs 7.5 lakh in the 2019 interim Union Budget. Relief of this kind would be greatly needed, especially for middle-class taxpayers. After standard deductions, those who make less than this threshold would not be subject to income tax, which could lead to an increase in investment and expenditure and promote economic expansion. But it's critical that the government doesn't rely just on tax breaks. Concurrently addressing comprehensive economic strategies is necessary to guarantee long-term, sustainable growth. A comprehensive strategy that includes structural reforms and sector-specific policies is necessary for overall economic stability and advancement, even while bigger tax rebates benefit people. For the purpose of creating a robust and prosperous economic environment, the government should concentrate on carefully balancing short-term relief efforts with long-term economic plans," said Prateek Bansal, Partner, Taxation & Regulatory, White & Brief Advocates & Solicitors.

3. Capital Gain Taxes

Currently, the Centre has established various tax slabs for various asset classes, including debt, equity, and real estate. The assets are categorized as either long-term or short-term based on the time periods. Experts have demanded that the capital gains tax structure be changed.

"An overhaul is necessary for capital gains. Capital gains are currently subject to different tax rates and are classified as either long-term or short-term depending on the length of time they are held, which adds complexity to the tax system. The investor community as a whole would benefit from rationalizing and standardizing the capital gains regime with regard to specific aspects, such as simplifying the holding period (long-term or short-term), maintaining consistency in long-term/short-term tax rates across different asset classes, altering the base year for indexation for long-term capital gains, etc. Ensuring overall compliance might be improved by coordinating these changes with the government's plans for taxpayer-friendly efforts, like annual information statements and uniform income-tax return forms," said Puneet Mishra, Partner, M&A Tax & Regulatory Services, BDO India.

4. New Tax Regime

With the introduction of modified tax slabs and concessional tax rates, the New Tax Regime was implemented. All taxpayers, including individuals, Association of Persons (AOPs), and Hindu Undivided Families (HUFs), are subject to it. The income tax slabs were lowered from seven to six in Budget 2023 in an attempt to simplify the personal income tax regulations. Experts believe that the New Tax Regime should have greater benefits.

"The majority of Indian taxpayers have a tendency to start investing their money in financial products that qualify for Section 80C tax deductions, which is INR 1,50,000. The salaried class also asserts exclusions from LTA, HRA, and housing loan deductions. The previous system was preferable for a person making INR 10 lakhs in salary income if the exemptions and deductions were more than Rs 2,50,000. Since most taxpayers fall within this category, the New Tax Regime has been accepted. Up to an income threshold of Rs 7,50,000, taxpayers benefit from the New Tax Regime. The government should permit deductions under the new tax regime, such as employee contributions to NPS (under Section 80CCD) and PF (under Section 80C), in order to boost support for the new tax regime. Additionally, this would encourage people to develop the habit of saving money for their retirement," said Preeti Sharma, Partner, Tax & Regulatory Services, BDO India.

5. NPS deduction expanded under the New Tax Regime

Currently, the National Pension System (NPS) contribution of up to Rs 50,000 precludes taxpayers choosing the New Tax Regime from receiving the deduction under Section 80CCD (1B). It is limited to the Old Tax System alone.

“The budget for FY25 should reinstate the Rs 50,000 deduction that was permitted under NPS under Section 80CCD(1B) under the new tax regime, but was eliminated on April 1, 2023. Taking a single stepWe expect the finance minister to remove the GST exemption for insurance policies in the next budget, which will result in lower insurance premiums. In addition to making insurance more affordable, this action would support PM Narendra Modi's goal of providing insurance to every Indian by 2047. Furthermore, we anticipate that the government will raise the 80C tax exemption threshold, which will support insurance coverage, encourage savings, and boost economic expansion," said Ankit Agrawal, Founder and CEO, InsuranceDekho. Furthermore, we would support raising this cap to Rs 1,000,000 under both tax regimes. Tax planners found great popularity in this Sec. 80CCD(1B) benefit, which was a major factor in encouraging people to invest in the NPS regardless of whether they worked in the organized sector or not,” said Kurian Jose, CEO, Tata Pension Management.

6. Remove GST from Insurance Policies

The life insurance industry's top priorities are the rationalization of the Goods and Services Tax (GST) and the tax relief on annuities. In order to guarantee that the cost benefit of insurance goods is transferred to the final customer and encourage more investment in life insurance products, experts believe the existing 18% GST rate should be reevaluated.

“We expect the finance minister to remove the GST exemption for insurance policies in the next budget, which will result in lower insurance premiums. In addition to making insurance more affordable, this action would support PM Narendra Modi's goal of providing insurance to every Indian by 2047. Furthermore, we anticipate that the government will raise the 80C tax exemption threshold, which will support insurance coverage, encourage savings, and boost economic expansion," said Ankit Agrawal, Founder and CEO, InsuranceDekho.