Budget 2024 income tax expectations: Move all exemptions, deductions to new tax regime, say salaried taxpayers

Income tax expectations Budget 2024: When it comes to the rationalisation of income tax slabs, over 53 per cent want the government to move Indians to the new tax regime with exemptions for income up to Rs 15 lakh.

By ET Online | Updated: Jul 23, 2024, 06.30 AM IST

Budget 2024: Move all exemptions, deductions to new income tax regime, say salaried taxpayer.

At present, taxpayers must choose between the old income tax regime, which includes deductions and exemptions, and the concessional or new income tax regime, which provides lower tax rates but restricts tax-saving opportunities. Even though the concessional tax system offers lower tax rates for the majority of taxpayers, individuals earning more than Rs 15 lakh encounter considerable difficulties.

Also Read: Budget 2024 Live Updates Income Tax: Change in income tax slabs, hike in standard deduction limit — Budget may announce tax sops for taxpayers

Both tax regimes set the tax rate for income over Rs 15 lakh at 30 per cent. This, combined with the elimination of most exemptions and deductions in the new regime, leads to a greater overall tax responsibility for taxpayers in this category. Consequently, many taxpayers in this income bracket increasingly agree that the existing tax rates do not sufficiently account for the complexities and costs linked to inflation and higher earnings.

What taxpayers want from Budget 2024

ET Online polled to gauge the expectations of the Indian population for the approaching budget. The poll garnered feedback from almost 9,500 readers. Here is what taxpayers want from Budget 2024 as per the survery.

When considering the rationalization of income tax slabs, the Budget 2024 survey found that over 54 per cent of the participants expressed their desire for the government to transition Indians to the new income tax regime while also proposing exemptions for income up to Rs 15 lakh.

Following the BJP's weakened mandate, the survey revealed that 56% of Indians believe Finance Minister Sitharaman should prioritize reducing income tax in the upcoming Union Budget 2024. Additionally, 37% of respondents indicated that the government should focus on addressing the rising job crisis.

More than 20 per cent of respondents want the government to increase exemptions under Section 80C and other sections of the old tax regime in Budget 2024. Additionally, over 14 per cent of respondents are calling for the extension of Section 80C benefits to the new tax regime. Furthermore, more than 11 per cent of the respondents hope the government will increase tax rates for higher-income slabs and reduce rates for lower-income slabs.

Other income tax Budget 2024 expectations

In a recent column Suresh Surana, Practising Chartered Accountant wrote for ET Wealth Online, here is what the FM can do to ease the tax burden of the common man.

Increase in basic exemption limit in Budget 2024: The basic exemption limit of Rs 3 lakh in the new tax regime is still very low and there is a widespread expectation that the same would be increased to Rs 3.50 lakh.
Widening of tax slab for 20% tax rate: The tax rate of 30% for income exceeding Rs 15 lakh in this regime is very steep and should be made applicable only for income exceeding Rs 30 lakh.
Maximum marginal rate to be reduced from 39% to 35.88%: There is a case for eliminating the highest effective tax rate of 39% (due to surcharge and cess) as this is very steep and covers very few taxpayers. The same should be capped at 35.88% [{30% tax rate plus 15% surcharge thereon} plus 4% cess thereon].
Increase in Section 80C deduction limit and allowing it in new tax regime
Hike standard deduction limit in Union Budget 2024: It is pertinent to note that several expenses incurred by employees during the course of their jobs are not deductible under current provisions. Additionally, the exemptions available to the salaried u/s 10 are capped at outdated limits that fail to account for inflation, rendering them ineffective. Thus, in order to address this, it is expected that such standard deduction limit be increased to Rs 60,000 and should be adjusted annually in line with the Cost Inflation Index (CII). This would ease the tax burden on salaried individuals and maintain their purchasing power amidst inflationary pressures.

Read the full column here.

Budget 2024: 4 ways the FM can make the new income tax regime more attractive

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The new income tax regime offers lower tax rates for individual taxpayers compared to the old regime. It has become the default option starting from FY 2023-24 if a tax regime has not been selected.

Financial experts have recommendations for Finance Minister Nirmala Sitharaman to improve the attractiveness of the new income tax regime.

Consider Bengaluru as a "metro city" for the purpose of HRA exemption in Budget 2024: "Currently, tax exemption for HRA is capped at 50% of basic salary if the rented accommodation is in Delhi, Mumbai, Chennai or Kolkata; and at 40% of basic salary if the rented accommodation is in any other city. Bengaluru is still not recognised as a metro city despite being the fastest growing city of the country. Adding Bengaluru, NCR, Pune and Hyderabad to the list of metro cities for the purpose of HRA exemption will ease the burden of a large population of salaried taxpayers residing in these cities," Poorva Prakash, Partner, Deloitte India, wrote in a column for ET Wealth Online.

Click here to read the full column.

Budget 2024 date and time: When will FM Nirmala Sitharaman present Budget 2024? How to watch Budget LIVE

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The budget session for 2024-25 has begun in the Parliament today, July 22, 2024. This will be the first full Budget following its re-election for the third term. Taxpayers are eagerly looking for some significant tax reliefs from the first Budget of the Modi 3.0 government. When will the Budget be presented? How can you watch the Union Budget 2024 live? Read here to find out.