Budget 2024: Small taxpayers may get some relief from FM this year

The Modi 3.0 government has accelerated preparations for the full Union budget of 2024. The budget for 2024-25 is likely to be presented in the third week of July. Economists believe that with the formation of a coalition government at the centre, the upcoming budget could be populist. That is, the government might announce some significant measures for the common man.

It is also said that to boost consumption, income tax rates could be reduced. The aim is to benefit lower income groups, whether they are salaried individuals or small business owners. What changes could take place in Income Tax in the 2024-25 union budget? Let’s find out.

The Indian economy is grappling with the problem of declining consumption. In order to address this issue, policymakers in the government are in favour of rationalising the income tax structure, especially for the lower income groups. This was mentioned the Indian Express in a report. There are speculations that instead of freebies, the government might reduce tax rates for those earning lower incomes. It is believed that a tax cut will increase disposable income for individuals. As income rises, people will spend more. This will increase consumption and accelerate economic activities.

Currently, the country operates with two tax regimes, Old and New. In the New Tax Regime, income tax starts at 5 percent for income above 3 lakh rupees. When the income rises to Rs 15 lakh, the tax rate rate moves progressivley to 30%. The report states that the tax rate increases six-fold when income becomes five times higher, which is quite substantial.

In the Old Tax Regime, the basic exemption limit is 2.5 lakh rupees. There is no tax on income up to 2.5 lakh rupees. As soon as your income exceeds 2.5 lakh rupees, the tax calculation begins. That is, 5 percent on income from 2,50,001 to 5,00,000 rupees, 20 percent on income from 5,00,001 to 10,00,000 rupees, while income above 10 lakh rupees attracts a 30 percent tax.

Chartered Accountant Vinod Rawal says that there is no expectation of any changes in the Old Tax Regime in the union budget. The number of tax slabs in the New Tax Regime could be reduced to make it more attractive or changes could be made in the income slabs. For example, currently there is a 30 percent tax on income above 15 lakh rupees. This criterion could be increased to 20 lakh rupees because currently, income tax rates increase six-fold when income rises from 3 lakh to 15 lakh rupees, which is quite high.

The Confederation of Indian Industry (CII) has also advocated for relief in income tax. CII President Sanjeev Puri said that people in lower slabs should get relief in income tax in the union budget for FY 2024-25. This is because inflation is at a high level.

FY 2024-25 budget will be the first union budget of Modi 3.0 government. It will reflect the economic agenda of the government. The government had made several major changes in the New Tax Regime in the 2023 budget, such as increasing the basic exemption limit from 2.5 to 3 lakh rupees. It had also introduced a standard deduction of 50,000 rupees for salaried class and increased rebate to make income up to 7 lakh rupees tax-free.

The government wants more people to choose the New Tax Regime. Therefore, steps could be taken to make it more attractive. How much relief will be provided to low-income earners on the income tax front will be clear only when the FY 2024-25 union budget is out.