Union Finance Minister Nirmala Sitharaman is gearing up to present her seventh budget, marking the first under ‘Modi 3.0’. With expectations running high among salaried taxpayers, there is a palpable hope for tax relief measures in the upcoming budget session.
Media reports and experts suggest that the Modi Government may introduce populist measures aimed at easing the tax burden on salaried individuals. These potential reforms are seen not only as a means to stimulate consumption within the middle class but also to align with broader economic goals, including fiscal deficit consolidation for the fiscal year 2024.
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One of the key proposals gaining traction is the revision of income tax thresholds. Ankit Jain, a Partner at Ved Jain & Associates, suggests a structured revision of income tax thresholds. His proposal recommends that individuals earning below Rs. 5 lakh annually should be exempt from income tax. For those earning between Rs. 5 lakh and Rs. 12 lakh, a tax rate of 10 per cent would apply. Income within the range of Rs. 12 lakh to Rs. 20 lakh would be taxed at 20 per cent, while any income exceeding Rs. 20 lakh would face a tax rate of 30 per cent. This approach aims to simplify the tax structure and potentially reduce the burden on lower-income earners while ensuring higher-income brackets contribute proportionately more to tax revenue.
Experts, including Dipesh Jain from Economic Laws Practice, advocate for increasing the current deduction limit of Rs. 1.5 lakh under Section 80C to either Rs. 2 lakh or Rs. 2.5 lakh. This adjustment is seen as beneficial not only for boosting individual savings but also for mitigating inflationary pressures within the economy.
SR Patnaik, Partner at Cyril Amarchand Mangaldas, emphasizes the necessity of revising the standard deduction, which has remained unchanged at Rs. 50,000 since 2019. He argues that an upward revision is crucial amidst the backdrop of rising living costs and stagnant wage growth, offering much-needed financial relief to taxpayers.
Ritika Nayyar proposes raising the housing loan interest deduction cap from Rs. 2 lakh to Rs. 3 lakh to provide more financial relief to homebuyers amidst rising real estate costs. She argues that separating this deduction from Section 80C would better cater to the specific needs of homebuyers, ensuring they can effectively manage housing expenses without constraints imposed by broader tax-saving limits.
Dipesh Jain emphasises the complexity inherent in the current capital gains tax structure, which includes multiple rates, conditions, and provisions like indexation benefits. He advocates for simplifying and rationalizing these rules to make them more straightforward and equitable. By doing so, Jain believes it would not only reduce compliance burdens but also enhance clarity and fairness in how capital gains are taxed, benefiting both taxpayers and the administration of tax laws.
As anticipation mounts ahead of Budget 2024, salaried taxpayers and economic stakeholders alike await with keen interest to see how these proposed measures will materialise, potentially reshaping the fiscal landscape for the year ahead.
