Introduction: As the eagerly awaited Interim Budget 2024 approaches, individuals and taxpayers hold high expectations for positive changes in income tax policies. This article presents a comprehensive wishlist focusing on crucial aspects like standard deduction, metro city definitions, LTCG tax rates, basic exemption limits, Chapter VI-A deductions, and home loan interest deductions.
Salaried individuals have long desired an increase in the Standard Deduction limit. Currently, the actual expenses faced by salaried individuals far exceed the existing limit of Rs. 50,000. While some advocate for raising it to Rs. 1 lakh, my preference is for it to be a certain percentage of the salary. For instance, 10% of the Annual Salary or 30-40% of the Basic Salary, or any other relevant percentage. This approach would provide higher relief through the standard deduction to individuals with higher salaries.
The definition of a metro city becomes relevant during HRA calculation u/s 10(13A). It is one of the most important deductions that the salaried class enjoys. A metro city is currently defined to include only 4 cities: Delhi, Mumbai, Chennai, and Kolkata. Nowadays, rentals have also increased steadily in other major cities like Bangalore, Hyderabad, Pune, Gurugram, Noida, etc. The definition of a metro city should be amended to include other cities also so that people accommodating there can also enjoy a higher limit of 50% during HRA calculation.
Currently, the LTCG tax rate u/s 112A is 10% of gains exceeding Rs. 1 lakh. To encourage long-term investments in the capital markets and make the markets less volatile, the government should consider reducing the tax rate to 5% instead of 10%. Simultaneously, it can amend the holding period of long-term capital assets in the case of listed equity shares to be 2 years instead of 1 year (presently). This move could result in making markets less volatile. Moreover, more people would become investors in the markets rather than traders, leading to benefits for both the Capital/Equity markets and the Indian Economy.
Currently, BEL under the old regime is Rs. 2.5 lakhs. For many years, this limit has not been increased. Considering the present scenarios, the government should increase this limit to Rs. 4 lakhs or 5 lakhs, or at the very least, it should be matched with the new regime limit of Rs. 3 lakhs.
The 80C deduction is the most preferred investment option among taxpayers, but investments eligible under this section carry a maximum cap of Rs. 1.5 lakhs. It should be increased to a minimum of Rs. 2 lakhs. The deduction limit for medical premium u/s 80D should also be increased to Rs. 50,000 from the present limit of Rs. 25,000 (other than for parents) as nowadays medical premiums and expenses have increased significantly, and it is a necessity for all of us to take medical policies for ourselves and our family members. Under 80EEB, a deduction is provided for interest on a loan for the purchase of Electric Vehicles (EVs) for loans sanctioned between 01/04/2019 to 31/03/2023. Considering the rising demand for EVs in India and to boost the EV industry, loans availed up to the 31st March 2026 period for purchasing EVs should be considered eligible for interest deduction under this section.
The present cap of Rs. 2 lakhs is now insufficient for taxpayers considering the current outlook for home loans. The cap should be increased to Rs. 3 lakhs to provide relief for high-interest expenses incurred.
Conclusion: As Budget 2024 approaches, the wishlist for income tax reforms emphasizes the need for adjustments that align with the current economic landscape and individual financial challenges. These proposed changes have the potential to provide much-needed relief to taxpayers and foster a more robust and equitable financial environment. The hopes are high, and the outcomes of the Interim Budget 2024 will undoubtedly shape the financial trajectory for many individuals and businesses in the coming fiscal year.
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[Source: Economic Times, India Today.]