Without changing the exemption-heavy previous system, the finance ministry is evaluating the prospect of boosting the standard deduction cap for income taxpayers under the new regime.
Furthermore, it seems doubtful that the NDA government, which is getting ready to unveil its first budget of a third term, will make significant changes to the capital gains mechanism—a problem the income tax department has been requesting a review of. Although there have been proposals to unify the holding period across asset classes, the government might not be willing to make any changes to the system right now.
While public consultations on the budget's outline have just started, the majority of the process is currently restricted to the finance ministry. A number of issues are being evaluated internally, some of which will be discussed with other government agencies before the finance ministry makes a final decision based on input from the PMO.
The general tone suggests that most government wings are in favor of giving taxpayers concessions, particularly the middle class, which has supported the Modi administration but is beginning to question the benefits it receives from paying taxes, whether those benefits are in the form of public healthcare or education.
For salaried taxpayers and those who get pensions under the new tax regime, FM proposed a standard deduction of Rs 50,000 in the 2023 Budget. This became the default option unless you opted out. Additionally, under the new tax regime, the Section 87A rebate was extended for taxable incomes up to Rs 7 lakh, meaning that those making up to this amount would not be required to pay any tax. Additionally, the highest fee under the new system was eliminated.
Income tax is now levied at a rate of five percent on any income beyond Rs three lakh. Leaders in the sector have suggested adjusting the rates in the upper categories in order to encourage spending. All salaried taxpayers, even those in the top section, will gain from a greater standard deduction even if it will result in a little income loss.
