Changes to the old and new income tax regimes are expected in the upcoming budget. Finance Minister Nirmala Sitharaman will present her seventh Budget on July 23. This would be the first full budget of Narendra Modi 3.0.
Tax payers under old and new tax regimes are expecting reliefs from the Union government. Tax experts also suggest adjustments in tax slabs for old and new tax regimes to reflect current economic coditions, cost of living, and commodities price burden.
2024 budget expectations that are to be announced
Income Tax
Budget 2024, is expected to make pleasing announcements in favour of salaried individuals. Here are our top expectations,
1. 80C Deduction Limit
The deduction limit for Section 80C for any investment made on life insurance premium, contribution to PPF, FD, ELSS etc. It is expected that the limit for Section 80C will be raised to Rs 2 lakhs from Rs 1.5 lakh. This has been not changed since 2014 and revising the limit will be a relief for taxpayers.
2. Increase Tax Exemption Limit
There are expectations that under the new tax regime the tax exemption limit will be increased to Rs 5 lakhs from Rs 3 lakhs. However, the government priorities, economic growth and several other factors are considered to raise the exemption limit.
3. Increase in Interest on Home Loan
As a part of promoting homeownership, it is expected that deduction under section 24(b) for deduction on interest on home loan of Rs 2 lakhs will be increased to Rs 3 lakhs.
This is said to increase the chances of individuals buying residential property, which will also help grow the real estate sector and boost personal finance.
4. 50% HRA on Non-Metro Cities
Salaried individuals receive HRA exemption as an allowance, however, it is exempt only under the old tax regime (optional regime). Exemptions allowed depend on whether they reside in a metro or non-metro city. HRA is exempt is usually the lowest of the following:
Actual HRA received
Rent paid minus 10% of basic salary
50% (metro city) of basic salary or 40% (non-metro cities) of basic salary
However, metro cities like Chennai, Delhi, Mumbai and Kolkata are only included for 50% under the Income Tax Act, and the rest of them come under the 40% category.
The government is expected to reassess the rules for claiming HRA in this Union Budget of 2024, with more people relocating to metro cities. \
5. Social Security Fund
Central Trade Unions have presented their memorandum to set up a fund for a social security scheme providing a minimum pension of Rs 9,000 for unorganised and agricultural workers. It is also expected to re-establish the Old pension scheme (OPS).
6. LTCG on Equity Investments
In the Modi 3.0 budget 2024, expectations from taxpayer are high regarding the change in Long term capital gain (LTCG) for equity investments made. The long term capital gain tax was reintroduced in 2018, but you can expect changes in the same under this union budget 2024.
GST
On June 22, 2024, the 53rd GST Council meeting was held by Nirmal Sitharaman and other finance ministers, which focused on the following key amendments.
1. Aadhaar- Based Biometric Authentication
To defeat the possibility of fraudulent claim of input tax credit, by issuing fake invoices Aadhaar based biometric authentication was introduced by the 53rd GST Council Committee. This is expected to reduce the fraudulent input tax claims.
2. GST on Petrol and Diesel
It is expected that in the budget 2024, petrol and diesel might come under the purview of GST. There is pending concord among the states regarding the GST rates applicable.
3. Railway Services
GST council has exempted the tax burden on platform tickets, this is a step forward to reduce the tax paid by the passengers during the journey and to make this affordable.
4. Extended GSTR-4 Filing
As a relief for small taxpayers, due date for filing GSTR 4 was extended from April 30th to June 30, 2024.
5. Interest and Penalty Waiver
For cases not involving any frauds, suppressions and misstatements, GST Council have decided to waiver the interest and penalty. This will be applicable only for the demand notices received under section 73 of the CGST Act.
6. GST Exemption on Hostel
There is a exemption on the services that is provided by the hostel outside the educational institutions up to Rs 20,000 per person per month. Finance Minister have brought this into purview to make hostel accommodation affordable for non-students.
7. Reduction of Rate to 12%
As a part of reducing the overal cost on both consumers and manufacturers, there is reduction in the GST paid on carton boxes from 18% to 12%.
Same is with milk cans; despite the material the cans are made there is a uniform tax rate applicable.
New income tax regime slabs:
No tax on income up to Rs 3 lakh.
Income between Rs 3 lakh to Rs 6 lakh is taxed at 5% (with rebate under Section 87A).
Income between Rs 6 lakh to Rs 9 lakh is taxed at 10% (with a rebate under Section 87A on income up to Rs 7 lakh).
Income between Rs 9 lakh to Rs 12 lakh is taxed at 15%.
Income between Rs 12 lakh to Rs 15 lakh is taxed at 20%.
Income above Rs 15 lakh is taxed at 30%.
Old income tax regime slabs:
Income up to Rs 2.5 lakh is exempt from taxation.
Income between Rs 2.5 lakh to Rs 5 lakh is taxed at 5%.
Income between Rs 5 lakh to Rs 10 lakh is taxed at 20%.
Income above Rs 10 lakh is taxed at 30%