Union Budget 2024: As the Union Budget 2024 is set to be presented tomorrow (July 23) by Finance Minister Nirmala Sitharaman, several key changes in income tax policies are expected. This includes adjustments in tax slabs, potential hikes in the standard deduction, and increased exemptions.
Potential Changes in Income Tax Slabs
There is speculation that the government may revise the income tax slabs. Currently, the tax rates under the new tax regime are as follows:
- Up to Rs 3 lakh: NIL
- Rs 3-6 lakh: 5% on income exceeding Rs 3 lakh
- Rs 6-9 lakh: Rs 15,000 + 10% on income more than Rs 6 lakh
- Rs 9-12 lakh: Rs 45,000 + 15% on income more than Rs 9 lakh
- Rs 12-15 lakh: Rs 90,000 + 20% on income more than Rs 12 lakh
- Above Rs 15 lakh: Rs 1.5 lakh + 30% on income more than Rs 15 lakh
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Income Tax Exemption Limit Increase
Reports suggest that the government might raise the income tax exemption limit from Rs 3 lakh to Rs 5 lakh. If this happens, individuals with an annual income of up to Rs 8.5 lakh could potentially be exempt from paying any income tax, considering the standard deduction and the rebate under Section 87A.
Reduction in Income Tax Rates
Divya Baweja, partner at Deloitte India, mentioned in a Mint report that the government might lower the top tax rate from 30 per cent to 25 per cent under the new tax regime. Additionally, there is speculation about raising the threshold for the highest tax rate from Rs 10 lakh to Rs 20 lakh under the old tax regime.
Standard Deduction Adjustments
Since its introduction at Rs 40,000 in the 2018 Budget and an increase to Rs 50,000 in 2019, the standard deduction has remained unchanged. The Union Budget 2024 may propose an increase in the standard deduction to between Rs 60,000 and Rs 1 lakh, potentially reducing the taxable income for salaried employees.
Section 80C Exemptions
The current Section 80C exemptions, which allow salaried employees to reduce their taxable income by Rs 1.5 lakh, have been unchanged since 2014. A revision could help taxpayers manage inflation, increase savings, and encourage more investment.
National Pension System (NPS) Changes
The National Pension System (NPS) might see an increase in the additional income tax deduction limit under Section 80CCD 1B and a higher withdrawal limit at maturity, aligning it with other schemes like the Employee Provident Fund (EPF).
House Rent Allowance (HRA) Adjustments
Abhishek Jain, a partner at Kailash Chand Jain & Co, suggested in the report that House Rent Allowance (HRA) exemptions need to be increased due to rising rental costs in urban areas. This would help reduce taxable income and make it easier for individuals to afford rented properties.
Medical Insurance Premium Deductions
Given the rising healthcare costs, there may be an increase in the deduction limit for medical insurance premiums under Section 80D of the Income Tax Act of 1961. The current limit stands at Rs 25,000 for individuals and Rs 50,000 for senior citizens.