Income Tax Slabs 2024-25 Budget 2024 Live Updates: New income tax regime tweaks, standard deduction hike and income tax relief on the cards?

All personal tax experts unanimously agree that to make the new income tax more attractive for taxpayers, especially for middle class salaried taxpayers, the government needs to tweak it to introduce more deductions and exemptions. One common deduction that experts believe should make way into the new income tax regime, and one that makes the old tax regime more lucrative for taxpayers, is housing loan deduction. Yet another recommendation is to increase the basic exemption limit and standard deduction under the new regime.

“Increase in the basic exemption limit from Rs 3 to 5 lakhs, raise the standard deduction to Rs 100,000,” Surabhi Marwah, Tax Partner, EY India tells TOI.

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“Co-existence of old and new tax regimes increases the complexities for individual tax-payers, however the Government may not do away with the old tax regime in this Budget. Transitioning to a single regime of taxation will require a complete transition plan, along with introduction of certain investment-based deductions in the new tax regime before making it the only tax regime.

Government’s transition plan to implement one regime of taxation should include stakeholder consultations, gradual phasing out of exemptions, reduced tax rates, broadening of tax base, and public awareness campaigns. Beginning with legislative amendments to consolidate the old and new regimes, followed by a clear timeline for implementation,” says Preeti Sharma, Partner, Tax & Regulatory Services, BDO India LLP responding to the Times of India Online pre-Budget 2024 expectations survey on personal tax.

“The Tax Collected at Source (TCS) rules on certain transactions under the Liberalised Remittance Scheme (LRS) have been a topic of debate since it got introduced in the year 2020. Under the current rules, TCS at the rate of 20% is applicable on remittances exceeding Rs 7 Lakhs per annum excluding remittances for education and medical treatment.

Lower TCS Rates of 0.5% and 5% are also available for certain transactions.

This tax collected at the time of remittance of funds creates tax liquidity challenges for individuals while sending money abroad. Concept of TCS under the Income tax regime was introduced to track certain transactions and to ensure tax compliance later on.

However, in the case of LRS, 20% of funds at the time of remittance gets blocked creating liquidity challenges for individuals, especially for those who rely on regular remittances for personal.

For Instance, a salaried employee who has already paid taxes on his salary income if remitting the same for maintenance of family abroad ends up paying TCS @20%. Given TDS is already deducted on such income, he has no option than to claim TCS as refund in his tax return which unnecessary creates cash flow challenges for such an individual.

Similarly, on the purchase of an overseas tour package as well, TCS is collected at a rate of 20% for transactions exceeding Rs 7 Lakhs and at the rate of 5% for transactions below the limit. If the intent of these provisions is to track such transactions, the applicable tax rates are expected to be reduced as they are creating multiple practical challenges for individuals,” says Preeti Sharma, Partner, Tax & Regulatory Services, BDO India LLP.

“The government already acknowledged that the earlier rate of 42.744% is among the highest in the world in the budget 2023 and considering the fact that government wants to push the new tax regime, there is no case of additionally taxing the super-rich.

In light of this, in Finance Act 2023 had rationalized tax rates for the super-rich where the peak surcharge of 37 percent was reduced to 25 percent for taxpayers filing under the new tax regime. This was carried out with a motive to bring down the maximum marginal rate from 42.744% to 39.00% and promote the new tax regime within the taxpayers. In addition, the surcharge on long-term capital gains was also rationalized to 15 percent for gains above Rs 2 crores.

Rather, the government could look at widening the tax base by inclusiveness approach of bringing the unregulated sector (vendors, professionals, small businesses) to help contribute to the tax kitty of the government,” Aarti Raote, Partner, Deloitte India tells TOI.

Employees receiving HRA and paying rent for their accommodation can claim a tax exemption on the allowance under the old income tax regime. The exemption amount depends on whether the employee resides in a metro city or not for tax purposes. However, if an employee receiving HRA does not live in a rented house, the entire allowance becomes fully taxable. One relief that is sought is to include more non-metro cities in the 50% House Rent Allowance (HRA) exemption list. HRA is a common component of employee compensation packages provided by many employers. Currently, rented houses in Delhi, Mumbai, Kolkata, and Chennai are eligible for a 50% exemption from HRA, while those in other locations fall under the 40% category. It is important to note that this classification was established over three decades ago.

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Income Tax Budget 2024 Expectations: Will FM Nirmala Sitharaman provide a big income tax relief to middle class, salaried taxpayers in Budget 2024? From a change in tax slabs and tax rates under the new income tax regime to raising the standard deduction limit and changes in Section 80C limits – the common man has several expectations from the Union Budget 2024. We take a look at the

top 10

income tax expectations from Budget 2024 for middle class and salaried taxpayers.

Kuldip Kumar, Partner at Mainstay Tax Advisors says that there are several areas where NRIs need and expect relief. There is a mechanism to mention the overseas bank account in the return form to receive the tax refunds, if any. But practically, tax refunds are not issued to the credit of overseas bank accounts while processing the returns. NRI has to open a bank account in India to realise the refund and then remit overseas. Refunds in overseas bank accounts for NRIs should be implemented.

Shortening the period to submit return acknowledgement (ITR V) in physical form to CPC to 30 days has also adversely impacted several NRIs as there are not many options to digitally e-verify the returns. Until those options are expanded, the time limit to submit the ITR V should be extended to 120 days.

Some of the other areas needing attention for NRIs also include, making corrections in the PAN online (which is currently manual, for example to change the citizenship), automated issuance of lower withholding certificates online where NRIs are receiving income in the form of rent or sale of property etc.

• Standardize capital gains tax across financial instruments

The government may look at simplifying the existing capital gains tax regime due to its complexity around different holding periods and tax rates across different category of assets. For example, the period of holding for debt instruments (other than some specified securities) is 36 months, for immovable property it is 24 months whereas for listed equity shares/equity-oriented mutual funds it is only 12 months.

Also, currently the base rate for taxation of long-term capital gains from listed equity shares/equity-oriented mutual funds is 10% without indexation (on gains exceeding Rs 1 lakh), while other long-term gains are taxed at 20% with or without indexation, depending on the nature of the asset.

Standardization will help reduce complexity and interpretation challenges.

• Increase limit of tax free capital gains from current Rs 1 lakh to Rs 3 lakh

Effective Financial Year 2018-19, Long Term Capital Gains (LTCG) exceeding Rs 1 Lakh earned from transfer of equity shares of a company or units of equity oriented mutual funds on which Securities Transaction Tax has been paid at the time of acquisition, are subject to tax @ 10% without indexation benefit. To boost investor confidence and incentivize infusion of further investment into the capital market, the government may consider enhancing the exemption limit from Rs 1 to Rs 3 Lakh.

The above recommendations were given by Parizad Sirwalla, Partner and Head, Global Mobility Services, Tax, KPMG in India as part of the Times of India Online pre-Budget 2024 survey.

Income Tax Filing: According to Preeti Sharma, Partner, Tax & Regulatory Services, BDO India LLP, it is important to strengthen online grievance redressal mechanism. “The Faceless Assessment and Appeals Scheme, launched in 2019 and 2021 respectively, aimed to eliminate physical interface between the taxpayer and tax officers, ensuring transparency and reducing corruption. With this, the usage and requirement of online grievance redressal mechanism has also increased, however individuals face challenges in receiving responses from the authorities on the grievance raised, whether it the grievance raised on CPC or to the Assessing Officer.

The responses to such grievances are often delayed and even when received, they are very generic. It is expected from the Government to guide or train the tax officers so that the individuals do not face such issues and can provide an efficient manner for closure of grievances raised by the taxpayers,” she tells TOI.

“The government’s focus has been to promote the new tax regime in their journey towards simplification of tax structure. In fact, last year’s budget had changes in personal tax only for individuals opting for the new tax regime. However, the old regime only offers multiple deductions and exemptions like HRA, home loan interest, LTA, 80C, donations, etc. The Government has given flexibility to the taxpayers to choose the best regime applicable for his/ her case depending upon his/ her personal situation and individual circumstances.

Few may find the old regime beneficial as a lot of deductions and exemptions help them to save tax and also ensure that they don’t hit the income ceiling where the surcharge becomes applicable. Moreover, the government would also factor that there is a huge market for housing loans, various investments etc. which qualify for section 80C benefit and not allowing tax benefits for these may hamper their market demand. Hence, the flexibility to opt between the regimes would continue,” Chander Talreja, Partner, Vialto Partners tells TOI.

Expectations are high that more changes may be brought in the new income tax regime – possibly raising the basic exemption limit, hiking standard deduction, or/and rationalising the income tax slabs and tax rates further. Tax experts are divided on the ideal tax income tax slabs and income tax rates under the new tax regime. However, most agree that the 30% tax slab above an income of Rs 15 lakh is still steep and needs to be implemented at incomes of at least above Rs 20 lakh. Surabhi Marwah, Tax Partner, EY India is of the view that the basic exemption should be raised to Rs 5 lakh. She also advocates reducing the income tax rates in order to provide more disposable income in the hands of taxpayers.

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Surabhi Marwah, Tax Partner, EY India lists the top measures that should be taken to make online ITR grievance redressal smoother

• Before making adjustment, give proper opportunity (including virtual hearing) to the taxpayer where requested
• Replies filed by taxpayer should be dealt by officers having tax domain knowledge.
• Reasons for rejections should be incorporated in the final intimation
• Address anomalies in ITR utility and CPC return processing software at the earliest
• Limit the scope of adjustments by CPC to apparent mistakes
• Instruct Faceless Assessment Unit to address adjustments u/s. 143(1) in scrutiny assessments

Responding to the Times of India Online Survey, Preeti Sharma, Partner, Tax & Regulatory Services, BDO India LLP listed her top 3 income tax expectations from Union Budget 2024:

• Revise tax slabs under new regime: Under New Tax Regime, the income starting at Rs 3 lakhs is taxable @5%. However, the tax rate escalates sharply to 30% at the income level of Rs 15 lakhs. It is expected that the Government revise the thresholds at which highest tax rate applies from Rs 15 lakhs to Rs 25 Lakhs and bring down the applicable tax rate at this income level (i.e. Rs 15 lakhs) to 25%. Similarly, the slab for minimum income subject to tax also need an upward revision from Rs 3 lakhs to Rs 5 lakhs.
• Increase standard deduction from Rs 50,000 to Rs 1 lakh: Standard deduction of Rs 40,000 was introduced in 2018 in lieu of deduction for transport allowance and medical expense reimbursement. This was increased to Rs 50,000 in 2019 and given the escalating living expenses, a further increase of the deduction to Rs 75,000 is expected.
• Allow deductions available u/s 80C (to more than Rs 1.5 lakhs) under the new regime: Deductions under section 80C of the Income-tax Act serve dual purpose – creation of retirement corpus and tax saving. Under the New tax Regime, this deduction is not available. A modified version of Section 80C of the Act may be introduced under the New Tax Regime for providing deduction for contribution to PPF and NPS to promote savings towards retirement especially for private sector employees who do not have any pension to rely on at the time of their retirement.