Budget 2024 Expectations: Raise Basic Income Exemption Limit to Rs 5 Lakh and Standard Deduction to Rs 1 Lakh
By: Admin
July 22, 2024
Categories: Income Tax News|News
To cater to individual taxpayers left disappointed after Finance Minister Nirmala Sitharaman refrained from announcing tax sops in interim Budget 2024, hopes now pivot on the upcoming full-year Budget scheduled for July 23. The wishlist of these taxpayers is extensive, centering on aspirations for lower tax rates, a heightened basic exemption limit, and amplified standard deductions. Financial pundits, however, foresee modest adjustments, largely confined to the nascent minimal exemptions tax regime.
An escalating clamor advocates for a significant elevation of the basic exemption threshold to Rs 5 lakh. Presently, thresholds sit at Rs 2.5 lakh and Rs 3 lakh for the old and new tax regimes, respectively. Advocates argue that raising the limit under the new regime to Rs 5 lakh could alleviate tax burdens for higher income brackets, potentially saving Rs 50,000-60,000 annually for taxpayers in the Rs 15-20 lakh bracket.
Adding a new tax slab for incomes ranging from Rs 15-20 lakh emerges as another crucial demand. Currently, the new tax regime imposes a 20 percent tax rate for incomes up to Rs 15 lakh, with a sharp rise to 30 percent beyond this threshold. A proposed intermediate slab could mitigate the abrupt tax burden escalation and foster a more progressive tax structure.
Further complexities arise from disparities in tax benefits between the old and new regimes concerning house rent allowance (HRA) and home loan interest deductions. These disparities impede the transition to the new regime, prompting calls for alignment or equivalence of benefits across tax frameworks. By extending HRA or home loan interest deductions to the minimal exemptions regime, a potential shift of over 70 percent of taxpayers from the old regime is envisaged, thereby simplifying tax compliance and incentivizing migration.
Equity investors keenly anticipate an upward revision of the long-term capital gains (LTCG) tax threshold from Rs 1 lakh to Rs 2 lakh. Since its introduction in FY 2018-19, the existing threshold has remained stagnant, prompting appeals for adjustment to accommodate inflation and market dynamics.
Conversely, concerns loom over potential setbacks, notably concerning the definition of ‘speculative business’ for futures and options (F&O) trading. Presently, F&O losses offset against diverse income streams like business, interest, dividend, or property earnings could face restriction if classified as speculative. Such a reclassification could confine offset options solely to gains within the F&O segment, impacting trading strategies and individual tax planning.
In summary, the expectations and apprehensions preceding the July 23 Budget announcement underscore a balancing act for policymakers. The push for tax relief and structural adjustments contends with fiscal realities and the imperative to sustain revenue streams. As taxpayers await the unveiling of fiscal policy directions, the Budget’s outcome will likely resonate far beyond individual wallets, influencing economic sentiments and market dynamics in the coming fiscal year.
Tax Reform, Budget 2024, Income Tax, Taxpayer Wishlist, Basic Exemption Limit, Tax Slabs, HRA Benefits, Home Loan Interest Deduction, LTCG Tax, Equity Market, Speculative Business, Futures and Options, Fiscal Policy, Economic Impact
