Union Budget 2024: Anticipated Income Tax Policy Revisions
As the presentation of Union Budget 2024 approaches on July 23rd, Finance Minister Nirmala Sitharaman is expected to announce significant adjustments to income tax policies. Here are the key anticipated changes:
Potential Revisions to Income Tax Slabs
* Revisions to income tax slabs are being considered, with the current rates under the new tax regime as follows:
* Up to Rs 3 lakh: NIL
* Rs 3-6 lakh: 5% on income exceeding Rs 3 lakh
* Rs 6-9 lakh: Rs 15,000 + 10% on income more than Rs 6 lakh
* Rs 9-12 lakh: Rs 45,000 + 15% on income more than Rs 9 lakh
* Rs 12-15 lakh: Rs 90,000 + 20% on income more than Rs 12 lakh
* Above Rs 15 lakh: Rs 1.5 lakh + 30% on income more than Rs 15 lakh
Enhanced Income Tax Exemption Limit
* The government may increase the income tax exemption limit from Rs 3 lakh to Rs 5 lakh. This could potentially exempt individuals with an annual income of up to Rs 8.5 lakh from paying income tax, considering standard deductions and rebates.
Reduction in Income Tax Rates
* The government might reduce the top tax rate from 30% to 25% under the new tax regime. Additionally, there may be a hike in the threshold for the highest tax rate from Rs 10 lakh to Rs 20 lakh under the old tax regime.
Adjustments to Standard Deduction
* Since 2019, the standard deduction has remained at Rs 50,000. The Budget may propose an increase to between Rs 60,000 and Rs 1 lakh, potentially lowering taxable income for salaried employees.
Revisions to Section 80C Exemptions
* The current Section 80C exemptions, which reduce taxable income by Rs 1.5 lakh, have not been revised since 2014. A review could help taxpayers navigate inflation, encourage savings, and foster investments.
National Pension System (NPS) Modifications
* The NPS may see an increase in the income tax deduction limit under Section 80CCD 1B and a higher withdrawal limit at maturity, bringing it in line with schemes like the Employee Provident Fund (EPF).
House Rent Allowance (HRA) Adjustments
* Exemptions for HRA could be raised due to increased rental costs in urban areas. This would help reduce taxable income and alleviate the burden of housing expenses.
Increased Medical Insurance Premium Deductions
* Considering rising healthcare costs, the deduction limit for medical insurance premiums under Section 80D may be increased. The current limit is Rs 25,000 for individuals and Rs 50,000 for senior citizens.
