Budget Expectations: Will the new tax regime be made more attractive?
Budget expectation: CA Ruchika Bhagat, MD, Neeraj Bhagat & Co believes that the government will make the new tax regime more appealing to individual taxpayers. CA Bhagat anticipates several key expectations and reforms to be unveiled in this Union Budget.
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Budget expectation: All eyes will be on the Indian Finance Minister Nirmala Sitharaman tomorrow, July 23, as she will present the Union Budget for the fiscal 2024-25. Like every year, this year too there are a lot of hopes around potential reforms to reshape India's income tax landscape.
CA Ruchika Bhagat, MD, Neeraj Bhagat & Co believes that the government will make the new tax regime more appealing to individual taxpayers. CA Bhagat anticipates several key expectations and reforms to be unveiled in this Union Budget.
"The new tax regime introduced in Budget 2020 aimed to simplify tax calculations by reducing exemptions and deductions while offering lower tax rates. Despite these efforts, the uptake has been slower than expected, with many taxpayers still opting for the old regime due to specific benefits like HRA exemptions and higher 80C deductions," said CA Ruchika Bhagat.
On a similar line, Sunil Nyati, Managing Director, Swastika Investmart Ltd. said, "To boost consumption in the economy, some relief is expected for the middle class in terms of income tax."
Experts reckon that the following reforms can make the new tax regime more appealing:
1. Increasing basic exemption limit:
Currently set at Rs 3 lakh, the basic exemption limit under the new tax regime may be raised to Rs 5 lakh. This adjustment would effectively reduce the tax burden on middle-income taxpayers, thereby enhancing disposable income and stimulating economic growth without the complexities of investment-related conditions.
2. Expansion of tax slabs:
Rationalising tax slabs could further boost disposable income and consumption. CA Bhagat believes that revising tax slabs upwards, such as increasing the threshold for the 30 per cent tax rate from Rs 15 lakh to Rs 20 lakh, would benefit a larger segment of taxpayers, encouraging more to opt for the new regime.
3. Increased tax rebates:
In the previous budget, a tax rebate was introduced for taxable incomes up to Rs 7 lakh. There is speculation that this threshold could be raised to Rs 7.5 lakh, providing relief to middle-income earners and potentially boosting spending and investment levels.
4. Enhanced deductions:
Extending benefits under Section 80C to the default tax regime is another anticipated move. This would make the new regime more attractive by allowing taxpayers to avail deductions on investments in schemes like PF, PPF, and others, currently available only under the old regime.
5. Special incentives for investments:
The National Pension System (NPS) may receive special attention, with proposals to extend deductions for individual contributions under the new tax regime. This aligns with the government's push to promote long-term savings and investments among taxpayers.
6. Housing sector stimulus:
To bolster the real estate sector, the budget might include increased deductions on home loan interest or principal repayments under the new tax regime. This move aims to support the government's 'housing for all' initiative and provide relief to taxpayers with housing loans.
7. Long-term capital gains:
There are expectations of raising the exemption limit on long-term capital gains from the current Rs 1 lakh to Rs 2 lakh. This adjustment would incentivise investments in the capital market and boost investor confidence.
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