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Budget 2024 income tax expectations: Why new tax regime is likely to be made more attractive
By Tanu Gupta
Budget 2024 income tax expectations: Increase in the limits of various exemptions and deductions is one of the prime expectations of the individual taxpayers from any Union Budget. But with the current government’s focus on a simplified tax regime with minimal exemptions and deductions, do the taxpayers need to adjust their old-time favorite expectation ? Should the taxpayer expect tax reliefs in the New Tax Regime instead ? Either way, the individual taxpayers have high hopes from this Budget, especially in the absence of any tax proposals announced in the interim budget in Feb 2024.
In this article, I list some of the expectations of individual taxpayers from the Union Budget 2024 to be presented on 23 July 2024.
Popularizing the New and Simplified Personal Tax Regime
A New Personal Tax Regime was introduced in Budget 2020 which was simple, in the sense that it allowed for very limited exemptions and deductions. To increase the takers for this regime and make it more tax beneficial for them, the Government then brought several changes in the new regime. Such as allowing standard deduction, higher basic exemption limit of Rs 3 lakh (as against Rs 2.5 lakh in the old regime), wider tax slabs, reduced surcharge from 37% to 25% on incomes above Rs 5 crore, nil tax liability for individuals with incomes up to Rs 7 lakh etc.
The government further made it a default tax regime w.e.f. FY 2023-24, continuing to move to its vision of a simplified tax system in India.
Marching towards the same goal, I expect that the government may propose further changes in the regime, to attract even those taxpayers who are still opting for the old tax regime. This may involve either further relaxing the slabs by widening them or restructuring them. Currently, 30% tax rate is applicable on incomes above Rs 15 lakh. The government may increase the same to Rs 20 lakh.
Also Read | Budget 2024: Government may offer guarantee under NPS to allay fears
Increasing the standard deduction
Standard deduction is a vanilla / blanket tax deduction allowed to the salaried taxpayers, irrespective of the expenses or investments done by them.
To provide further tax relief to the salaried taxpayers while keeping the tax system simple, I expect that the government may increase the standard deduction from Rs 50,000 to Rs 75,000 under the new tax regime.
Direct payment of income tax refund to overseas bank accounts
The income tax return form provides for mentioning the foreign bank account for direct credit of income tax refund, where the Non-Resident taxpayer does not have an Indian bank account. However, practically, such a facility is not yet active and the refunds cannot be credited to the foreign bank account for the NR taxpayer.
Also Read | Income Tax expectations Budget 2024: Tax exempt limit for savings account interest to be raised to Rs 25,000?
With a focus to improve taxpayer services and increasing use of technology and digital platforms in the tax system, I hope that the government activates the facility of direct credit of tax refund to foreign bank accounts.
With India on its track to “Viksit Bharat” by 2047, and with a high growth target, the Government may put more disposable income in the hands of taxpayers, so as to further fuel consumption and growth of the economy. Therefore, one may expect some tax reliefs in the Union Budget 2024, however, they may continue to be along the same theme followed in earlier budgets – simplifying and rationalizing the India tax system!
(The author is Partner Mainstay Tax Advisors LLP. Views expressed are personal)
Budget 2024 income tax expectations: Increase in the limits of various exemptions and deductions is one of the prime expectations of the individual taxpayers from any Union Budget. But with the current government’s focus on a simplified tax regime with minimal exemptions and deductions, do the taxpayers need to adjust their old-time favorite expectation ? Should the taxpayer expect tax reliefs in the New Tax Regime instead ? Either way, the individual taxpayers have high hopes from this Budget, especially in the absence of any tax proposals announced in the interim budget in Feb 2024.
In this article, I list some of the expectations of individual taxpayers from the Union Budget 2024 to be presented on 23 July 2024.
Popularizing the New and Simplified Personal Tax Regime
A New Personal Tax Regime was introduced in Budget 2020 which was simple, in the sense that it allowed for very limited exemptions and deductions. To increase the takers for this regime and make it more tax beneficial for them, the Government then brought several changes in the new regime. Such as allowing standard deduction, higher basic exemption limit of Rs 3 lakh (as against Rs 2.5 lakh in the old regime), wider tax slabs, reduced surcharge from 37% to 25% on incomes above Rs 5 crore, nil tax liability for individuals with incomes up to Rs 7 lakh etc.
The government further made it a default tax regime w.e.f. FY 2023-24, continuing to move to its vision of a simplified tax system in India.
Marching towards the same goal, I expect that the government may propose further changes in the regime, to attract even those taxpayers who are still opting for the old tax regime. This may involve either further relaxing the slabs by widening them or restructuring them. Currently, 30% tax rate is applicable on incomes above Rs 15 lakh. The government may increase the same to Rs 20 lakh.
Also Read | Budget 2024: Government may offer guarantee under NPS to allay fears
Increasing the standard deduction
Standard deduction is a vanilla / blanket tax deduction allowed to the salaried taxpayers, irrespective of the expenses or investments done by them.
To provide further tax relief to the salaried taxpayers while keeping the tax system simple, I expect that the government may increase the standard deduction from Rs 50,000 to Rs 75,000 under the new tax regime.
Direct payment of income tax refund to overseas bank accounts
The income tax return form provides for mentioning the foreign bank account for direct credit of income tax refund, where the Non-Resident taxpayer does not have an Indian bank account. However, practically, such a facility is not yet active and the refunds cannot be credited to the foreign bank account for the NR taxpayer.
Also Read | Income Tax expectations Budget 2024: Tax exempt limit for savings account interest to be raised to Rs 25,000?
With a focus to improve taxpayer services and increasing use of technology and digital platforms in the tax system, I hope that the government activates the facility of direct credit of tax refund to foreign bank accounts.
With India on its track to “Viksit Bharat” by 2047, and with a high growth target, the Government may put more disposable income in the hands of taxpayers, so as to further fuel consumption and growth of the economy. Therefore, one may expect some tax reliefs in the Union Budget 2024, however, they may continue to be along the same theme followed in earlier budgets – simplifying and rationalizing the India tax system!
(The author is Partner Mainstay Tax Advisors LLP. Views expressed are personal)
