Budget 2024: Expectations for tax sops under old regime run high

Over the years, assorted changes person been made to the caller authorities to heighten its appeal, including taxation rebates for incomes up to ₹7 lakh, wider taxation slabs, and little surcharges for the ace rich. 

However, the past 3 budgets person not seen immoderate caller benefits oregon deductions nether the aged authorities to trim taxpayers' nett taxation liability oregon supply further incentives for investments oregon definite expenses. 

It is wide that the authorities aims to promote taxpayers to power to the simpler caller taxation system. However, galore taxpayers are not yet acceptable to marque the transition. With the upcoming Budget owed successful July, expectations are precocious among stakeholders that the aged authorities could spot accrued deduction limits connected modular deductions, Section 80C, lodging loans, and wellness expenses, among different things, successful enactment with inflation. 

“The taxation operation should promote deductions for investments alternatively than promoting an alternate taxation authorities for individuals without specified deductions arsenic seen nether the caller taxation regime," said Neeraj Agarwala, Partner, Nangia Andersen India. “While little taxation rates whitethorn marginally alleviate immoderate load connected taxpayers, the absorption should beryllium connected providing capable deductions that promote investments and bash not consciousness penalising. This attack would not lone foster a civilization of redeeming and investing but besides guarantee that individuals consciousness supported successful their fiscal planning," helium added.

Mint spoke to experts to recognize their expectations from the Budget connected the idiosyncratic taxation front.

Standard deduction, 80C successful sync with inflation

The Section 80C bounds was past accrued successful 2014 from ₹1 lakh to ₹1.5 lakh. About 19 investments and expenditures, including provident fund, tax-saving communal funds, security premiums, and children's tuition fees, are clubbed nether the wide ₹1.5 lakh bounds of 80C.

“The 80C bounds needs to beryllium revised arsenic it has remained unchanged since 2014 contempt rising ostentation rates," said Archit Gupta, laminitis and CEO, Cleartax. “Such a revision would not lone assistance taxpayers combat ostentation but besides stimulate savings and investments successful cardinal fiscal instruments similar ELSS, taxation saver FDs, PPF etc."

Also Read: How Section 80C of IT Act has fallen retired of sync with inflation

Experts besides suggest that the ₹50,000 modular deduction bounds and the taxation exemption bounds request to beryllium revised. 

“With the emergence successful the outgo of living, the basal slab which is not taxable to taxation indispensable beryllium accrued and linked to inflation. This has peculiarly deed the backstage assemblage employees hard arsenic their compensation is not linked to ostentation but decided by marketplace forces," said Kumarmanglam Vijay, partner, JSA Advocates and Solicitors.

Vijay added that expenses similar children’s acquisition interest should get abstracted relief. “The outgo of children’s acquisition present forms a important information of a wide household. Clubbing the aforesaid with the concern bounds prescribed nether conception 80C does not supply immoderate capable alleviation to the employee," helium said.

Tax enactment for homebuyers

Section 24 allows a maximum deduction of ₹2 lakh per twelvemonth connected involvement paid towards a lodging loan. Pranjal Bansal, spouse A A P T & Associates, chartered accountants, said the authorities should see expanding this bounds truthful that middle-class families striving for location ownership tin fulfil their dream.  

“The involvement constituent of lodging loans represents a important fiscal load for galore taxpayers. Increasing the taxation rebate connected lodging indebtedness involvement would not lone alleviate fiscal unit connected borrowers but besides promote concern successful the existent property sector, supporting the government's extremity of lodging for all," helium said. 

The housing-for-all extremity volition get further impetus with the hold of the Pradhan Mantri Awas Yojana-Urban (PMAY-U) until 31 December, 2024, Gupta said. 

“This hold is aimed astatine completing the existing lodging projects and supporting municipality development​. Additionally, we expect enhancements oregon caller introductions successful taxation benefits akin to Section 80EEA, which offers a deduction of Rs. 1.5 lakh connected location indebtedness involvement aimed astatine affordable housing," helium said.

However, this caller conception should person an enhanced bounds successful the worth of the location indebtedness and the spot value. “Given the summation successful lodging costs, affordable lodging nary longer costs ₹45 lakh and this revision is inevitable to marque homeownership much affordable and financially accessible," Gupta added.

Rationalisation of superior gains tax

Capital gains taxation is presently complex, fixed the antithetic holding periods and taxation rates crossed antithetic assets. “These request rationalisation successful the signifier of simplified indexation provisions, unified taxation attraction for listed and unlisted securities and streamlined classification of indebtedness and equity instruments. These changes could importantly trim administrative complexity and promote greater information successful the fiscal markets," said Bansal. 

Gupta said there’s a request for rationalisation of taxation rates connected ESOPs for startups. “Employee banal ownership plans presently look analyzable dual taxation. For instance, employees earning implicit ₹15 lakhs look a precocious taxation load connected ESOPs nether the caller regime, paying a 30% taxation connected the worth astatine workout arsenic a perquisite and perchance an further 20% connected semipermanent capital gains astatine sale, starring to effectual taxation rates of 40-50%," helium said. 

“To promote retention and reward risk, it's suggested that ESOPs held for implicit 2 years beryllium taxed lone astatine the clip of sale. This would destruct dual taxation and align the taxation outgo with the existent realization of gains," helium added.

Lower taxation rates

The wide sentiment among taxpayers is that their nett taxation liability is rather precocious if they harvester nonstop and indirect taxation paid connected antithetic services. Experts expect the taxation slabs to beryllium widened to mitigate the impact. 

“Currently, the highest slab complaint for individuals is 42.74%, applicable to those with taxable income supra ₹5 crore. For individuals earning betwixt ₹5,00,000 and Rs 10,00,000, the apical slab complaint is astatine 20.8%, and for those betwixt ₹10 lakh and Rs 15 lakh bracket the apical slab complaint is 31.2%. With constricted deductions, intelligibly the slab rates are connected the higher side," said Agarwala. 

This forces individuals to edifice to assorted techniques similar location rent allowance oregon HRA claims successful the sanction of parents and spouse, taxation structuring of funds successful offshore accounts, and taxation harvesting to prevention tax, Agarwala added. 

Also Read: Modi 3.0: It's clip to constitute a guidebook for taxation reforms

“Though these whitethorn not beryllium technically wrong, with a little acceptable slab rate, individuals whitethorn beryllium consenting to wage taxes without looking for methods to prevention further taxes. A much straightforward and little taxation authorities tin alteration the cognition of income taxation from being penalizing to being contributory, fostering a much affirmative cognition towards taxation payments."

Bansal concurred and said: “Revising the taxation slabs to guarantee a much progressive taxation operation could marque the strategy fairer and much equitable, ensuring that higher income groups lend their just share."

Relief for rising aesculapian expenses

Given the rising healthcare costs, determination is an anticipation for an summation successful the deduction bounds for aesculapian security premiums nether conception 80D. 

“Currently, the bounds stands astatine ₹25,000 for individuals and ₹50,000 for elder citizens. It is anticipated that the fund whitethorn rise these limits to ₹50,000 for individuals and ₹75,000 for elder citizens, to enactment healthcare needs substantially. Additionally, extending the benefits of Section 80D to the caller taxation authorities would not lone beforehand equitable entree to healthcare but besides promote wider adoption of wellness insurance," said Gupta.

Alternatively, it is expected that the authorities would trim GST rates connected aesculapian insurance, among different cardinal expenses. “A little complaint of GST connected wellness insurance, word insurance, aesculapian treatments, and elder attraction services, which is presently astatine 18%, whitethorn beryllium considered arsenic it adds a important magnitude to already precocious healthcare costs to an individual," said Vijay.