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Budget 2024-25 – Taxpayers Expectations from the Interim Budget Statement

Finance Minister Nirmala Sitharaman is set to present the Interim Budget for 2024-25 on February 1st. This budget will cover expenditures for the first 3 months of the next fiscal year until a new government is formed after the upcoming Lok Sabha elections.

While no major policy changes are expected in an interim budget, taxpayers have some expectations regarding personal taxation and other areas impacting their finances. Let’s know the 6 main demands that individual taxpayers want the Finance Minister to address in her budget speech.

1. Revision of Income Tax Slabs

There is a widespread demand to revise income tax slabs and rates to provide some relief to taxpayers from high inflation. Tax experts suggest that the basic tax exemption limit of ₹3 lakh should be increased along with an upward revision in tax slabs.

Rahul Charkha, Partner at Economic Laws Practice says, “It would be fair to revise income tax slabs to relieve taxpayers from the burden of high rates, even though this is an interim budget. A reduction in tax rates is a reasonable expectation.”

With elections nearing, tweaking of personal tax slabs to benefit lower and middle income taxpayers is anticipated. The standard deduction of ₹50,000 provided to salaried individuals may also be raised to ₹75,000.

2. Increase in Tax Rebates and Exemption Limits

In 2023, the tax rebate limit under Section 87A was increased from ₹5 lakh to ₹7 lakh. Taxpayers now expect a further hike to around ₹7.5 lakh in the upcoming budget.

This will allow more individuals to enjoy complete tax exemption and encourage spending. However experts say rebates alone cannot drive economic growth. The focus should be on comprehensive reforms for long-term stability.

3. Rationalization of Capital Gains Tax

Currently, capital gains tax rates vary based on the holding period and type of asset. Industry associations have demanded standardization of capital gains tax across assets to reduce complexity.

Streamlining the definition of short-term and long-term holding period and aligning tax rates across asset classes can improve compliance and transparency.

4. More Tax Benefits under New Regime

To make the new income tax regime more attractive, taxpayers want the option to claim certain deductions like PF and NPS contributions.

Preeti Sharma, Partner at BDO India says, “Allowing these deductions will promote retirement planning alongside enhancing acceptance of the new tax regime.”

5. Restoring NPS Deduction under New Regime

The ₹50,000 deduction for NPS contributions under Section 80CCD(1B) was removed in the new tax regime in 2023. Industry experts demand that this benefit should be reinstated and increased to ₹1 lakh.

This will boost NPS adoption and facilitate retirement corpus building.

6. Removal of GST on Insurance Policies

The life insurance sector wants removal of 18% GST on insurance policies to improve affordability. This decrease in GST (Goods and Services Tax) can make premiums affordable for greater insurance penetration.

Along with the above demands, salaried taxpayers also expect a hike in medical reimbursement limit and conveyance allowance.

While interim budgets traditionally avoid major announcements, some minor tweaks in personal taxation and exemptions provide relief to the common man. Let’s see if the Finance Minister accommodates any of these demands in her budget speech (Budget 2024 – Interim Budget Statement).

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