Expectations for the budget in 2024: The middle class in India is eager to receive their fair share of tax breaks and benefits as the Interim Budget 2024–25 approaches in just two days. This important group, which is frequently referred to as the engine of economic expansion, is anticipating tax relief in order to lessen the burden of rising costs and stagnating incomes. As they work to overcome the obstacles of a shifting economy, it is clear that they are in need of financial relief.
Since this year is election year and the government is in charge, the budget is vital. The focus is on Finance Minister Nirmala Sitharaman and how the NDA government intends to strike a balance between political appeal and fiscal objectives.
The government must exercise caution in enacting tax relief policies so as not to jeopardize its efforts to reduce the deficit. On the other hand, ignoring the problems the middle class faces could have just as negative effects by lowering consumer confidence and impeding economic expansion.
Important things experts want the minister of finance to know:
1. Increasing the Standard Deduction
The Finance Act of 2018 established a standard deduction of Rs 40,000 from pay. In 2019, this was raised to Rs 50,000. Nearly five years have passed since the standard deduction was altered. It is anticipated that in 2024, this cap will rise to INR 1,00,000. Rahul Charkha, Partner, Economic Laws Practice, stated that since standard deduction was included in the new tax system last year, the demand has grown louder.
2. More Relief under Section 80C
The most popular tax-saving option available to people under the Old Tax Regime is Section 80C. People are investing heavily in Section 80C-eligible securities as a result of increased awareness. The cost of life insurance premiums, college tuition, and house loan debt repayment has all significantly increased. Therefore, the majority of people frequently reach the Rs. 1.5 lakh barrier. For many budgets, the taxpayers have therefore been eagerly awaiting an increase in this cap. The practical maximum for Section 80C as of right now should be as much as Rs 3 lakh, according to Charkha, because the cost of living, retail inflation, etc. have increased at a considerably faster rate than the Section 80C limit.
3. Health Insurance
There are tax deductions for yearly medical expenses and health insurance premium payments for those who choose to remain under the previous tax regime with exemptions. These deductions are not permitted under the new tax system. Currently, deductions for individuals and Hindu undivided families are covered by Sections 80D, 80DD, and 80DDB of the Income Tax Act. The most widely utilized one is Section 80D because of its broader application.
Preventive health check-ups are permitted up to a maximum of Rs 5,000, which is part of the overall Rs 25,000 cap. In addition, taxpayers are eligible to deduct an extra Rs 25,000 for health insurance premiums paid as well as costs associated with their parents' preventive medical examinations. The deduction limit rises to Rs 50,000 if the taxpayer - either himself, a family member, or his parents - for whom the premium is being paid is regarded as a senior citizen.
The Section 80D limit should be raised from Rs 25,000 to Rs 50,000 for individuals and from Rs 50,000 to at least Rs 75,000 for senior citizens, given the current situation where health insurance has played a big part in the epidemic. The taxpayers would benefit because they would have greater security and receive tax advantages.
4. Other deductions
Individuals can also typically take advantage of Section 80E (interest on education loans), Section 80EE (interest on housing loans), Section 80G (donations), Section 80GG (rent in cases where no HRA is received), and Sections 80TTA and 80TTB (interest on savings bank or fixed deposit accounts). According to Charkha, over the past few years, none of the limitations under any of these sections - monetary or periodic - have been changed. The government ought to reconsider these caps in light of rising interest rates, real estate values, and philanthropic giving, in addition to inflation.
5. Improvements in Tax Slabs
Former Prime Minister Pranab Mukherjee implemented the tax slabs in the Old Tax Regime with the Finance Act of 2013. The basic exemption ceiling was Rs 2 lakh at the time. The basic exemption amount was later increased to Rs 2.5 lakh in 2015, and it has stayed the same ever since. The income tax rate for those earning between Rs 2.5 and Rs 5 lakh was lowered from 10% to 5% in 2018. A rebate of Rs 12,500 was established for people having a total taxable income of up to Rs 5 lakh in the interim Finance Act, 2019 (No. 1). This implied that there was no income tax obligation for anybody making up to Rs 5 lakh. However, their tax duty increased by Rs 13,000 (including tax cess) if their taxable income topped Rs 5 lakh.
"Being the first budget of the present administration's second term, the Finance Act, 2019 (No. 2) was greatly anticipated. The rate of surcharge was raised to 25% and 37% for individuals falling into the tax category of Rs 2 crore–Rs 5 crore and more than Rs 5 crore, respectively, leaving the taxpayers extremely upset despite the fact that there was no decrease in tax rates. As a result, 42.74% had the highest effective income tax rate. The NDA administration did not drop tax rates in 2020; instead, it instituted a new tax system that let taxpayers choose to pay taxes at a reduced rate by giving up certain exemptions and deductions. The tax bands under the new tax structure were very slightly changed by the Union Budget 2023. Since the new tax system mainly benefited a certain subset of taxpayers, it has not yet garnered the anticipated praise," Charkha said.
