Budget 2024: Will salaried class get a budget boost?
What are the income tax expectations of the salary class from the budget? Let’s find out.
Salary class professionals have high expectations from the upcoming Union Budget 2024-25. Although the interim budget of 2024 was a pre-election budget, it did not provide much relief to the salaried class. As a result, it is natural for taxpayers to have high hopes from the 2024 full fledged budget.
What are the income tax expectations of the salary class from the budget? Let’s find out.
According to a report in Mint cited from Deloitte India’s partner Divya Baveja, several changes were made to the New Tax Regime in Budget 2023, which motivated taxpayers to switch to this regime. However, the response was not as high as expected.
In this scenario, there is hope that the government might consider reducing the highest 30% tax rate under the New Tax Regime to 25%. Currently, there is a 30% tax on income slabs exceeding ₹15 lakhs under the New Tax Regime. Additionally, the existing limit of ₹50,000 for Standard Deduction might also be increased.
A report in FE mentions that discussions are underway on measures to provide relief to the middle class. Also increasing the Standard Deduction limit under the New Tax Regime is part of the discussion. The limit for Standard Deduction might be raised from ₹25,000 to ₹50,000. This means that a Standard Deduction of up to ₹1 lakh could be provided under the New Tax Regime.
Baveja believes that the government might also offer relief under the Old Tax Regime in the budget. There could be discussions on increasing the income limit for the highest tax rate from ₹10 lakhs to ₹20 lakhs and raising the 80C limit. Currently, those choosing the Old Tax Regime have to pay 30% tax on income exceeding ₹10 lakhs.
Investments that can save tax
Section 80C of the Income Tax Act encourages long-term investments while saving on taxes. Investments in options like PPF, EPF, 5-year tax-saving FD, ELSS, and life insurance can offer a deduction of up to ₹1.5 lakhs. In 2014, then-Finance Minister Arun Jaitley had increased the Section 80C limit from ₹1 lakh to ₹1.5 lakhs. With the rise in the cost of living and no changes in this limit over the past 10 years, it is anticipated that the 80C deduction limit might be increased to ₹2 lakhs.
For salaried employees living in rented accommodations, House Rent Allowance (HRA) is a good way to save on taxes. The condition for claiming HRA is that the employee must receive HRA from the employer and pay rent for the accommodation.
Since COVID-19 pandemic, rent prices have significantly increased, making it more expensive to live in major cities. The government might expand the definition of metro cities to provide relief to the salaried employees. Currently, only four cities—Delhi, Mumbai, Kolkata, and Chennai—are classified as metro cities.
Every year, the budget is awaited and there is hope for relief in income tax from the government. It is to be seen as to how many of the expectations from the budget are fulfilled in the Finance Minister’s budget speech on July 23.
Also, Income tax return filing for AY 2024-25 is ongoing, with a deadline of July 31. File your return before July 31. Log in to the e-filing portal and file the return yourself. If you only have salary income, you need to fill out ITR-1. You can match the details provided in the pre-filled data with Form 16, Form 26AS, and AIS to file your return.