7 Prominent Expectations of Individual Taxpayers from Union Budget 2024

Nirmala Sitharaman will present her sixth Union Budget on February 1, 2024. Individual taxpayers are expecting important changes in taxation rules when the Finance Minister announces it. As this is an election year, many experts are optimistic about the government opting for popular measures to increase exemptions and impress the country’s taxpayers.  

To know more about what’s in store for individual taxpayers in the Union Budget 2024, read on. 

Revision of Tax Slabs and Rates

The Finance Minister may provide the following relaxations in tax liabilities in the Union Budget 2024:

• The government may increase the threshold for the highest income tax rate from ₹10 lakhs to ₹20 lakhs and reduce the tax rate from 30% to 25%
• The Finance Minister can also reduce the income tax rate to 20% for income between ₹10 lakhs and ₹20 lakhs 
• The government can also think of decreasing the tax rate to 25% for those having an annual income of over ₹20 lakhs   

Change in the Structure of Tax Exemptions

The upcoming may include the following changes in the structure:

• The government may raise the exemption limit under Section 80C to ₹2.5 lakhs
• Considering the rising cost of education, the Finance Minister can also consider treating these deductions as separate from 80C deductions 
• To lower OOPE (Out-of-Pocket Expenditures on Healthcare), the government may also increase the exemption limit to ₹50,000 and ₹1 lakh for senior citizens
• The new Union Budget can also bring various types of bank deposits under the exemptions available under Section 80TTA

Rise in Standard Deductions 

To restore the Old Pension Scheme (OPS), the Budget for the salaried class can include many attractive announcements, as mentioned below:

• For instance, the government may consider increasing the standard deductions available to them
• These deductions are available to salaried individuals as fixed deductions without requiring them to provide proof of expenses incurred
• Due to the increase in the cost of maintaining living standards, the government may think of raising the current threshold of standard deductions from ₹50,000 to ₹1 lakh

Easier Late Tax Filing for Taxpayers

Here are some of the current rules relating to late filing of ITR:  

• Filing an Income Tax Return (ITR) after the due date of July 31 attracts various restrictions, penalties and interest charges 
• They don’t allow you to pay taxes for two years, even if you pay additional taxes. 

However, the tax authorities can issue you notices for the previous 10 fiscal years if an income wasn’t assessed. Many experts are of the opinion that taxpayers must get an equal opportunity to file taxes for the last 10 fiscal years. 

Against this backdrop, the Union Budget 2024 may provide taxpayers with an opportunity to file ITR for previous years with penalties. This will even encourage voluntary tax compliance.  

Simplification of Capital Gains Tax

The current taxation structure is quite complex, which makes it challenging for investors to understand. They have to consider various factors, such as:

• Asset classes
• Holding period
• Tax rates
• Residency status

In the new Union Budget, the Finance Minister can simplify this taxation regime by taking the following measures:

• Streamline the classification of debt and equity instruments
• Merge tax treatment for unlisted and listed securities
• Simplify indexation norms  

Easing TDS Compliance for NRI Home Sellers

Currently, home buyers need to comply with the rule of deduction of 1% tax deducted at source for property purchases of over ₹50 lakhs. The government may make the following changes:

• Complying with TDS norms is quite simple in the case of resident sellers as they only have to file Form 26QB
• However, this process is comparatively complex for NRI (non-resident Indian) sellers
• In the upcoming Union Budget, the government may ease these norms to facilitate easier compliance for NRIs

Providing Tax-free Status to Annuity Income from NPS

The Union Government made an income of over ₹7.5 lakhs from the National Pension Scheme taxable since the FY 2021-22. However, to promote social welfare and financial security, the government can also consider providing a tax-free status to annuity income from the NPS. 

This is because senior citizens rely on annuity income as their primary source of income. As subscribers already have to purchase annuities from NPS, it makes little sense to put an additional burden of taxation on retired personnel. 

Some of these expectations may see the light of the day in the new Union Budget. The government may also introduce some of these measures in the Budget presented post-elections. Many experts are optimistic about changes relating to tax exemptions and deductions, which could have huge implications for the fiscal deficit.