• Notification Date: 09-01-2024
• Notification No: N/A

Interim Budget 2024: FM Sitharaman to make New Changes in Income Tax slabs again?

Finance Minister Nirmala Sitharaman is scheduled to present the Interim Budget 2024-25 on February 1, 2024, instead of the full Budget like other years. Last Budget, the Centre brought in multiple new regulations for Income Tax. One notable announcement about personal taxation was the establishment of the New Income Tax Regime as the default tax system. 

FM Sitharaman had earlier said that there would be no major announcements in this budget as the Lok Sabha Election 2024 is due in April-May this year. Also, the Election Commission’s Code of Conduct states that the Interim Budget in the election year cannot have major schemes.  

However, experts have still listed their expectations and feel the Centre should look into some of the tax clauses and exemptions to help the taxpayers. 

1. 80D Deduction Limit 

Archit Gupta of ClearTax reported that the Centre should think about increasing the deduction limit under Section 80D for medical insurance premiums from Rs 25,000 to Rs 50,000 for individuals and Rs 50,000 to Rs 75,000 for senior citizens. Gupta believes that this adjustment is necessary to accommodate the growing healthcare expenses. 

Besides, he added that there should be an extension of Section 80D benefits to the new tax regime, which would help ensure fair and equal access to healthcare services. 

2. Basic Exemption Limit 

Mumbai-based chartered accountant Chirag Chauhan stated that the basic exemption limit should be raised both in the new and old tax regimes, in view of high inflation. He said that an increase in the basic exemption limit can reduce the tax liability across slabs in both old and new tax regimes. 

“The basic exemption limit under the old and new regimes can be raised further by another Rs 50,000 in account of high inflation,” Chauhan said. 

3. Taxable Income 

In her Budget speech for 2023-24, Union Finance Minister Nirmala Sitharaman said: "The government proposes to increase the income tax rebate limit from Rs 5 lakh to Rs 7 lakh in the new tax regime." Nitin Baijal, Executive Director, Deloitte India, said that a further increase in the taxable income limit would increase the take-home salaries of the salaried class.   

"The Budget wish list is incomplete without the ask to raise the taxable income limit. As this would decrease the tax outflow, taxpayers can enjoy higher take-home pay, especially the salaried class who have limited tax saving options," Baijal said while listing his Budget expectations. 

4. TDS Compliance for Home buyers 

At present, the threshold limit for TDS on property purchases is Rs 50 lakh. If the value of the property exceeds this amount, the buyer must deduct TDS at a rate of 1% of the total consideration amount. This rule applies to both residential and commercial properties. 

Gupta of ClearTax further said that the Interim Budget can bring in some clarity on this clause for NRI sellers. "The taxation process is straightforward for resident sellers (using Form 26QB), but it is more complex for Non-Resident Indian (NRI) sellers," said Gupta. 

5. Taxation of Capital Gains 

Any profit or gain that comes from a capital asset can be defined as the income from capital gains. These incomes are taxable in the year in which the transfer or sale of the capital asset takes place. There are two categories of capital gains: short-term capital gains (STCG) and long-term capital gains (LTCG). capital gains. There are two categories of capital gains: short-term capital gains (STCG) and long-term capital gains (LTCG). 

The current capital gains tax regime poses a challenge for investors due to its complex structure. There are several factors that need to be taken into account, including asset classes, holding periods, tax rates, and residency status. “The government should streamline the classification of equity and debt instruments, unify tax treatment for listed and unlisted securities, and simplify indexation provisions," said Gupta further added. 

6. Home Loan relief in New Tax Regime 

Bhavesh Shah, Senior Partner, Hasmukh Shah & Co., said that after FM Sitharaman introduced new tax slabs under the New Tax Regime, many taxpayers, especially the youngsters, made a quick switch to the new system. But he noted that those who had home loans to pay stuck to the old regime. 

“We have seen a lot of youngsters switching to the new tax regime this year after Budget 2023. But those with home loans are reluctant to make the shift. The home loan interest deduction of Rs 2 lakh is the key barrier to making the switch to the new regime," Shah stated.