Budget 2024 Income Tax Expectations: Top 10 Things FM Sitharaman Should Do | Business

By Surabhi Marwah
Budget 2024: Given the upcoming common elections, it’s anticipated that the approaching price range in February 2024 is more likely to be a ‘Vote on Account’, with the full-fledged price range anticipated in July 2024. While the Government did dole out tax advantages within the interim price range in 2019, one might not anticipate any main tax reforms or amendments on this time, just like the previous interim budgets in 2009 and 2014, the place no main adjustments had been introduced.Having stated that, beneath is the want listing that could be thought-about from a private tax standpoint:
1. A extra helpful concessional tax regime (CTR) – It is advisable that some adjustments be made to the CTR to make it extra engaging to the taxpayers comparable to availability of sure deductions like curiosity on housing mortgage for self-occupied property, retiral contributions (PF, PPF, NPS), insurance coverage premiums and so forth. Further, taxpayers must be allowed to go for the CTR within the revised and belated tax returns as effectively. Also, the frequency of switching between tax regimes could also be elevated for particular person taxpayers with revenue from enterprise or career
2. Increase in customary deduction – Given the rise in price of dwelling for people and the truth that salaried taxpayers can not declare deduction for bills incurred by them, the federal government may take a look at rising the usual deduction from the present restrict of Rs 50,000 to Rs 1,00,000.
3. Tax free present restrict – Currently, presents acquired from non-relatives are tax free provided that the mixture worth of such presents is as much as Rs 50,000 throughout a monetary 12 months. In case the full worth of the presents acquired in a monetary 12 months exceeds Rs 50,000, then the mixture worth of presents is taxable. The restrict of Rs 50,000 has been in drive since 01 April 2006, and therefore, one might now anticipate the restrict to be elevated to Rs 1,00,000.

4. Deferral of tax cost on Employee Stock Option Plan (ESOP) advantages for all employers – ESOPs are taxable as wage perquisite on the time of allotment of shares (upon train of shares by staff). Given the absence of liquidity for unlisted firms, it turns into exceedingly tough for workers to rearrange for funds to pay the train worth in addition to the taxes on such allotment of shares beneath an ESOP.
Currently, there’s a leisure given by way of deferment of such taxes to the stage of sale of shares by the workers as towards the stage of allotment of shares to staff, for sure eligible start-ups lined beneath part 80-IAC of the Income tax Act, 1961 (ITA). It could be helpful to salaried taxpayers, if the federal government considers extending such a advantage of deferment of taxes to all employers.
5. (*10*) of capital positive aspects – Currently, there are a number of tax charges and holding intervals to find out the taxability of capital positive aspects. One might anticipate that the holding interval could also be standardized throughout numerous asset courses. Further, the present restrict of non-taxability of as much as Rs 1,00,000 on long run capital positive aspects from sale of fairness shares and fairness oriented mutual funds could also be enhanced to Rs 2,00,000.
Additionally, as per Section 50CA of the Act, presently, the place shares are transferred at a worth lower than the Fair Market Value (FMV), the capital positive aspects are computed by treating the FMV because the sale consideration as a substitute of the particular sale consideration. In case of an immovable property, a leisure is offered and if the stamp obligation worth is lower than 110% of the particular sale consideration, then the capital positive aspects is calculated utilizing the precise sale consideration and never the stamp obligation worth. However, no such threshold or leisure is offered for unlisted shares. The same restrict may very well be launched for unlisted shares as effectively for normative taxation.
6. Changes to deductions/exemption for housing – The restrict on deduction obtainable for curiosity paid on housing mortgage for a self-occupied property has been Rs 2,00,000 for the reason that monetary 12 months 2014-15. While extra deductions had been launched subsequently for the curiosity paid on housing mortgage for first time householders, there was no change within the deductions obtainable to different taxpayers. Hence, this common restrict of Rs 2,00,000 could also be elevated to Rs 3,00,000 contemplating the inflation through the years.

Similarly, the set-off of loss from a let-out home property has been capped at Rs 2,00,000 efficient monetary 2017-18 to convey it on par with the deduction obtainable for self-occupied property. However, this causes hardship to the people as in lots of circumstances the losses are carried ahead and amassed through the years with no actual profit obtainable, particularly in circumstances the place the curiosity paid on housing mortgage exceeds the lease acquired by the taxpayer. Hence, these limits could also be reviewed and eliminated or elevated by the Government.
Additionally, contemplating the elevated rents prevailing in most cities put up pandemic, it is suggested that Tier 2 cities comparable to Hyderabad, Pune, Bengaluru, Ahmedabad, Gurgaon and so forth. be included within the listing of metro cities. This will enhance the restrict from 40% to 50% of the fundamental wage for the aim of calculating the House Rent Allowance (HRA) exemption.
7. Interest deduction on mortgage obtained for electrical automobile – Current restrict of deduction for curiosity paid on mortgage for buy of electrical automobile is Rs 1,50,000. Increasing such restrict of curiosity deduction and eradicating the sundown clause on issuance interval of mortgage (which is presently pegged until 31 March 2023) could also be thought-about given the thrust on Environmental, Social and Governance (ESG) agenda.

8. Availability of credit score for Tax Collected at Source (TCS) from people on the stage of tax withholding by their employers – With a number of funds now coming beneath the ambit of TCS applicability and given the elevated fee of TCS efficient 1 October 2023 (e.g. TCS on abroad tour packages, TCS on buy of abroad shares by staff of Indian firms beneath ESOP / RSU plans and so forth.), there might exist a money circulate affect for people by way of first paying such TCS after which claiming a refund of the identical whereas submitting their particular person tax returns. Hence, employers must be allowed to offer credit score for such TCS on the wage tax withholding stage so as to alleviate the money circulate affect for salaried staff.
9. Tax deducted at Source (TDS) compliances whereas coping with Non-Resident (NR) people – In case a person purchases of property from an NR particular person or pays rental revenue to NR people, there exists extra compliance burden for the client or tenant by way of acquiring Tax Deduction Account Number (‘TAN’) and submitting of TDS returns. The identical could also be streamlined, by introducing use of challan-cum-return, which is presently obtainable solely in case the vendor or landlord is a person resident in India.
10. Taxability of provident fund (PF) curiosity and contribution – The tax legal guidelines presently present for taxation of accretions on employer’s contribution in extra of Rs 7,50,000 to PF, Superannuation fund (SAF) and National Pension System (NPS). However, readability remains to be awaited on identification of funds to which extra contribution was made, computation of accretion in case of SAF and NPS and so forth. Further, with impact from the monetary 12 months 2020-21, the exemption obtainable to a person’s contribution to PF was revoked for circumstances the place the person’s contribution to PF exceeded Rs 2,50,000 every year (the restrict is Rs 5,00,000 if there isn’t a employer contribution). The PF authorities have been withholding taxes on such curiosity paid, on accrual foundation. It is advisable that the taxation of such curiosity on PF be deferred to the date of withdrawal/ cessation of employment in keeping with the stage of taxation of PF amassed steadiness.
Some of the opposite elements the place one would possibly want for readability from the tax authorities are:

While the above is a want listing of the proposed adjustments to the tax legal guidelines, one should additionally do not forget that the Finance Minister has indicated that the upcoming price range is a Vote on account, and no spectacular bulletins are made at the moment. Hence, taxpayers might have to attend till the brand new Government is available in after the elections for any main adjustments to the tax legal guidelines.
(Surabhi Marwah is Tax Partner, People Advisory Services, Private Tax, EY. Ammu Sadanandhan, Director, People Advisory Services, EY and Uday Bhartia, Senior Manager, People Advisory Services, EY contributed to the article)