Budget 2024 Expectations Income Tax: The Union Budget 2024, which is expected to be announced in February 2024, will be an interim budget due to the upcoming general elections at the end of the year. This means that major changes in income tax policy are unlikely, but taxpayers still have some key expectations and desires.

Also read: Budget 2024 Income Tax: ‘Need to reduce the burden on the salaried class’, big expectations from the Finance Minister

Based on historical trends in the analysis of interim budgets, it is clear that these budgets generally act as a continuation of existing policies with a tendency to avoid major policy changes or the introduction of new initiatives. As a result, interim budgets generally do not contain significant announcements or changes. This observation is in line with the statement made by the Finance Minister regarding the interim budget of 2024, which said that no dramatic changes will emerge.

“It is entirely possible that the government may not make any changes or may make some minimal changes that are widely applicable,” said Suresh Surana, founder, RSM India.

According to Surana, the basic changes to be implemented by the taxpayers either through amendments or through announcements if the ruling party comes back to power are discussed below:

Basic exemption limit increased from Rs 2.50 lakh to Rs 3.5 lakh

At present, the Income Tax Act, 1961 (hereinafter referred to as the ‘IT Act’) provides a basic exemption limit of Rs 2,50,000 which has remained unchanged for many years. Considering the current annual inflation rate of around 5%, high cost of living and the time that has elapsed since the last revision, it is expected that the basic exemption limit will be increased to Rs. 3,50,000. This will benefit a large number of the approximately 7 crore taxpayers and give them some protection against inflation.

Increase in limit for investment related deductions under Section 80C

One of the very popular deductions that many taxpayers avail is under Section 80C of the IT Act which provides for deductions related to investments like provident funds, ELSS, life insurance premium, home loan repayment, 5 year bank deposits etc. . Limit of Rs. Rs 150,000 under this section was last revised in Budget 2014. Thus, in view of the greater need for financial security due to inflation and economic uncertainty over the past few years, the limit limit should be increased to Rs. 200,000.

Increasing the threshold limit for Section 80D and extending the applicability of medical expenses to individuals other than senior citizens

Section 80D of the IT Act provides for deduction relating to medical premium paid. Such deduction is limited to Rs. 25,000 and in case of senior citizens, the maximum limit has been restricted to Rs. 50,000. However, health insurance premiums have increased due to the Covid pandemic and inflation as well as the need for higher coverage. Thus, there is a need to increase the limit from the existing Rs. 25,000 to Rs. From Rs 50,000 for non-senior citizens and senior citizens. 50,000 to Rs. 75,000.

Tax on dividends distributed by domestic companies will be limited to 20%

Under the existing provisions of the IT Act, there is double taxation on income in case of companies – first companies pay corporate tax and then shareholders pay tax on dividends. In the case of resident individual shareholders, the tax on dividends can be up to 35.88%. Non-residents, on the other hand, have to pay tax on dividends at the rate of 20% (plus surcharge and cess), which is reduced to 5%-15% by double tax avoidance agreements.

To reduce the cascading effect of double taxation, it is expected that the maximum tax on dividends distributed by domestic companies in the hands of resident shareholders will be limited to 20% (plus surcharge and cess).

Overall, the focus of the Budget is likely to be on fiscal prudence and stability, with limited scope for major tax reforms. However, some targeted amendments may be announced to address inflation and encourage investment.

However, these are only expectations and speculations, and the actual budget proposals may differ.

Budget 2024 Date: The interim budget of 2024 in India will be presented on 1 February 2024.