Budget 2024: Salaried Class Calls For Tax Adjustments, HRA Relief, EV Incentives

Budget 2024: As the FY25 Budget approaches, the salaried class remains hopeful that these proposed changes will be considered to ease their financial burdens

Budget 2024: Salaried individuals are eagerly awaiting Finance Minister Nirmala Sitharaman's presentation of the full Budget for FY25 later this month, hoping for tax breaks to alleviate rising living costs. According to a report by Deloitte, the salaried class is seeking a comprehensive overhaul of tax slabs, adjustments to housing rent allowance (HRA) rates, incentives for electric vehicle (EV) sales, and a stronger push for affordable housing in Budget 2024.

Calls for Parity Between Old and New Tax Regimes

The Budget 2023 introduced several changes to the new personal tax regime, such as raising the basic exemption limit from Rs 2.5 lakh to Rs 3 lakh and reducing the surcharge on incomes over Rs 5 crore from 37 per cent to 25 per cent. These measures aimed to make the new tax regime more attractive.

However, the old tax regime remained unchanged, highlighting the urgent need for an upgrade in its slab structure. Analysts at Deloitte anticipate that the government may raise the income tax exemption limit under the new tax regime to Rs 5 lakh from the current Rs 3 lakh.

Revisiting HRA Deductions

As the new tax regime becomes the default option, extending its benefits to the old tax regime would be a welcome move for employees who still prefer to avail HRA exemptions and 80C deductions. An increase in the standard deduction from the current Rs 50,000 would provide additional relief.

The rental market in major cities such as Bengaluru, Hyderabad, Pune, and Gurugram has experienced significant growth, with over 30 per cent year-on-year (YoY) increase in 2023. This surge, driven by the reopening of offices and the shift to hybrid work models, underscores the need to review HRA deductions. Currently, the HRA component constitutes 20-30 per cent of an employee's total pay package. Revising the exemption to allow 50 per cent of the basic salary for more cities would offer much-needed relief to a broader population, Deloitte noted.

Boosting EV Adoption

To reduce carbon emissions, the government has been promoting EVs through various schemes and subsidies. With a target for EVs to comprise 30 per cent of all vehicle sales by 2030, incentives such as those under the FAME II scheme are crucial.

The introduction of section 80EEB in the Income Tax Act in 2019 allowed a deduction of up to Rs 1.5 lakh per annum on interest paid for EV loans, but this was not extended beyond March 2023. Extending and raising the deduction to Rs 2 lakh a year would significantly encourage EV adoption.

Home Loan Relief for Affordable Housing

Aligning with the government's vision of “housing for all,” the reintroduction of section 80EEA, which allowed a deduction for interest paid on home loans for affordable housing, is highly anticipated. This section, which benefitted first-time homebuyers, was not extended beyond March 2022.

As the FY25 Budget approaches, the salaried class remains hopeful that these proposed changes will be considered to ease their financial burdens.