Union Budget 2024: Anticipating Changes In Income Tax Reforms? Here's What To Expect

Interim Budget 2024: Speculations are rife about possible changes to the tax slabs to provide relief to the common taxpayer

In recent years, taxpayers have voiced concerns about the existing slabs and the need for adjustments to account for inflation and rising living costs. ( Image Source :Getty )

By CA Ruchika Bhagat 

As the calendar flips to 2024, anticipation is mounting regarding the upcoming Union Budget and the potential reforms it may bring, particularly in the realm of income tax. The Annual Budget is a crucial policy document that outlines the government's fiscal plans for the year ahead. For taxpayers and businesses alike, understanding the potential changes in income tax regulations is of paramount importance. In this article, we delve into the key areas where reforms are anticipated and explore the potential impact on individuals and businesses.

Interim Budget 2024

The Interim Budget 2024, which will be unveiled on February 1 by Union Finance Minister Nirmala Sitharaman, is expected to be light on major policy announcements due to the upcoming Lok Sabha elections that are slated for early next year. After the general elections, the comprehensive Budget will be saved for presentation after the new government is formed. Interim Budgets typically include estimates for spending, revenue, the fiscal deficit, financial performance, and information about the current government's upcoming fiscal year, but they do not include any significant policy changes.

Tax Slab Revisions

There are seven slabs in which the assessee is taxable, which are quite confusing for a layman to understand. There should be an easier and simpler way to tax individuals. One of the most eagerly awaited aspects of any Budget is the revision of income tax slabs. In recent years, taxpayers have voiced concerns about the existing slabs and the need for adjustments to account for inflation and rising living costs. As we approach the 2024 Budget, speculations are rife about possible changes to the tax slabs to provide relief to the common taxpayer.

A possible scenario could involve an increase in the basic exemption limit, thereby reducing the tax burden on individuals with lower incomes. Additionally, the government may consider introducing new slabs to ensure a more progressive tax structure, aligning with the evolving economic landscape.

Digital Transformation and Tax Compliance

The digitization of financial systems has been an ongoing theme, and the 2024 budget is expected to emphasize the government's commitment to enhancing digital infrastructure. From an income tax perspective, this could mean an increased focus on leveraging technology for tax compliance and administration.

Anticipated reforms may include the introduction of advanced data analytics and artificial intelligence tools to streamline the tax assessment process. This would not only improve efficiency but also contribute to reducing tax evasion and ensuring a fair and transparent tax system.

Incentives for Sustainable Practices

With concerns over climate change and environmental sustainability becoming more widespread, the 2024 Budget may include incentives for people and companies to adopt eco-friendly practices. There may soon be tax advantages for investments made in energy-efficient equipment, sustainable business practices, and renewable energy. This year, there is hope that the government will offer new tax benefits for renewable energy to stimulate this industry, as there were no additional benefits for green energy last year.

This fits in with the government's larger plan to support a green economy and may act as a spur for improvements in the economic and environmental spheres.

Focus on Startups and Innovation

India's startup ecosystem has been thriving, and the government has consistently shown support for entrepreneurship and innovation. In the upcoming budget, there may be targeted tax incentives and reforms aimed at boosting the startup ecosystem further. Potential measures could include tax breaks for research and development activities, easier access to capital through tax credits, and a friendlier tax environment for early-stage startups. These changes would not only encourage innovation but also contribute to job creation and economic growth.

Easing the Compliance Burden

Tax compliance can often be a cumbersome process for businesses and individuals alike. The 2024 Budget may address this concern by introducing measures to simplify the tax filing process and reduce the compliance burden.

This could involve the implementation of a more user-friendly tax portal, clearer guidelines, and increased support for taxpayers navigating the complex landscape of tax laws. Easing compliance would not only benefit individual taxpayers but also contribute to a more business-friendly environment.

Wealth Tax Considerations

The issue of wealth inequality has gained prominence globally, and India may seek to address this concern through potential reforms in the wealth tax domain. The 2024 Budget might explore options such as revising wealth tax rates, expanding the scope of taxable assets, or introducing a progressive wealth tax structure.

Such measures would not only generate additional revenue for the government but also contribute to a more equitable distribution of wealth in the country.

Conclusion

As we stand on the cusp of the 2024 Indian Budget, the anticipation of income tax reforms is palpable. The government's approach to taxation plays a pivotal role in shaping the economic landscape and influencing individual financial planning and business strategies. While these anticipated changes provide a glimpse into potential reforms, it is crucial to remember that the final Budget may bring surprises and unexpected shifts in policy. As taxpayers, businesses, and industry experts eagerly await the unveiling of the Budget , one thing is certain – the decisions made will have a profound impact on the nation's economic trajectory in the year ahead.

The author is the MD at Neeraj Bhagat & Co.

[Disclaimer: The opinions, beliefs, and views expressed by the various authors and forum participants on this website are personal and do not reflect the opinions, beliefs, and views of ABP News Network Pvt Ltd.]