Union Budget 2024: In view of elections close by, this 12 months’s price range to be introduced on February 1, 2024, will be an interim price range. Although typically no important modifications are introduced within the interim budgets, price range occasions at all times create pleasure as hopes construct up to get some relief. In final 12 months’s price range, the federal government restructured the slabs and the tax charges beneath the new tax regime (NTR) to incentivize tax payers to transfer in direction of a simplified tax regime by giving up sure exemptions and deductions.The slabs and charges remained unchanged beneath the previous regime. Yet many taxpayers nonetheless selected the previous regime, as giving up deductions like HRA, LTA, deductions for investments beneath Sections 80C/80D, and so forth. didn’t cut back their tax legal responsibility compared with the one beneath NTR.
The indisputable fact that the federal government additionally made the NTR the default regime final 12 months signifies that in some unspecified time in the future, within the close to future, it’s anticipated that there’ll solely be one regime. But till that convergence occurs, even these selecting the previous regime have hopes from the price range. Here is the want listing, and a few of them, if not now, do advantage consideration later, when the newly elected authorities will current the complete-12 months price range.Raising the fundamental exemption restrict and decreasing the surcharge
Those persevering with beneath the previous regime expect the fundamental exemption restrict to be introduced to par with that beneath the brand new regime, i.e., Rs. 300,000. The surcharge of 37% must also be introduced down to 25% as relevant beneath the NTR, as the utmost marginal price beneath the previous regime is excessive as in contrast to charges prevalent in developed international locations.
Raising the Standard Deduction
Currently, salaried taxpayers are allowed a normal deduction of Rs. 50,000. It was final raised in 2018 from Rs. 40,000. It deserves the revision contemplating the rise in the price of residing, and going ahead, the identical ought to be linked to computerized changes at 12 months finish with the fee inflation issue. Besides, there isn’t any separate deduction obtainable for bills incurred by staff working from house. Several employers have completely applied the work-from-house mannequin for the obligatory working of staff from house for at the very least a sure variety of days in per week. This is one other issue justifying the rise within the present customary deduction restrict.
Deduction for medical insurance coverage or bills
In the publish-COVID-19 scenario, there’s a specific deal with the well being and wellbeing of oneself and relations. The price of medical remedy has gone up considerably and requires greater protection for medical insurance coverage. Therefore, the restrict for deduction of medical insurance coverage ought to be raised from Rs. 25,000 to Rs. 50,000 and to Rs. 100,000 for senior residents, together with for bills the place they don’t have the insurance coverage. The threat of COVID-like ailments and their spreading tendency do require residents to search immediate medical consideration, not solely for their very own security but in addition that of others in society. Medical remedy being an necessary side of high quality of life, the deduction beneath Section 80D of the Income-tax Act, 1961 (Act) ought to be allowed beneath the brand new tax regime as properly to maintain taxpayers motivated to maintain their preparations in place in case of medical wants.
Housing mortgage curiosity deduction
Currently, the deduction for housing mortgage curiosity is offered up to Rs. 200,000 beneath the previous tax regime. The set-off loss beneath the pinnacle income from home property in opposition to different heads is restricted to Rs. 200,000. Considering the rise in rates of interest and the price of development, the mentioned restrict could be raised to Rs. 300,000. Housing is a vital requirement for each household in society. The authorities can be attempting to present housing for poor households. Therefore, the deduction of housing mortgage curiosity ought to be allowed beneath the brand new tax regime as properly to maintain tax payers incentivised to have their very own house.
Extension of deduction u/s 80EEB for the acquisition of an electrical automobile.
A deduction of up to Rs. 150,000 is offered in respect of curiosity payable on the acquisition of an electrical automobile. However, there was a situation that the mortgage be sanctioned between April 1, 2019 and March 31, 2023. Considering India’s aspirations and dedication in direction of internet zero emissions, the deduction beneath Section 80EEB be prolonged for curiosity on loans sanctioned after April 1, 2023, to encourage taxpayers to transfer on to electrical automobiles. Further, to incentivize tax payers at giant, deduction beneath 80EEB must also be obtainable beneath the brand new tax regime.
Deductions for retirement planning
India has a big younger inhabitants, and making certain social safety planning for the residents of India is essential for a secured future and stability in society. The authorities launched the brand new tax regime, and deductions beneath Section 80C and 80CCD (besides for employer’s contribution) have been taken away for these opting the brand new tax regime. These ought to be reintroduced with respect to contributions made by the people for their very own contribution for retirement planning to encourage taxpayers to save for their retirement.
Taxation of Capital Gains
The present methodology of taxing capital positive aspects is kind of complicated. There are completely different tax charges and holding durations for completely different belongings and for taxpayers with completely different residential statuses. Simplification on this regard will actually ease tax payers, given that there’s a sharp enhance in individuals investing within the capital market.
Tax solely the actual income
There are at present provisions within the tax legal guidelines the place one finally ends up paying taxes on notional income. For instance, if a taxpayer has greater than two self-occupied home properties and people are vacant, tax is levied on a notional foundation. This ought to be completed away with.
One-point taxation for inventory choices
Currently, inventory possibility income is taxed in two phases: first on the time of allotment of shares after which later on the time of sale of shares. Where an worker is allotted shares, tax is levied at relevant slab charges on the perk worth calculated as a distinction between the market worth of shares on the time of allotment and the value paid by the worker. This creates a money stream hardship as staff find yourself paying taxes with out having realized any positive aspects. When these shares are bought, staff pay capital achieve tax on the appreciation within the worth because the allotment of shares. In case there’s a decline within the share value, staff endure the lack of taxes paid earlier on the time of allotment, moreover not making any achieve from the shares. A inventory possibility is likely one of the components of compensation, not solely to incentivize staff but in addition to remunerate them in a non-money method. In the case of startups, that is very related, as they’ve a shortage of capital and want to rent and retain expertise.
Therefore, one level of taxation on the time of sale ought to be reintroduced, because it used to prevail a number of years in the past.
While the time will inform what comes true, the above expectations are certainly aligned with India’s persevering with progress story.
(Kuldip Kumar and Tanu Gupta are Partners, Mainstay Tax Advisors)
