Budget 2024 | Desires of middle-class taxpayers: increased standard deduction of Rs. 1 lakh and higher basic income exemption limit of Rs. 5 lakh

According to analysts, the Finance Minister need to think about instituting a new income bracket of Rs 15-20 lakh, which would be subject to a 25 percent tax rate under the new tax system.

Will FM Nirmala Sitharaman increase the basic exemption limit in the Union Budget 2024?

Individual, middle-class taxpayers are now placing their hopes in the full-year Budget, which is scheduled to be presented on July 23, after being denied tax breaks in the interim Budget 2024, which was revealed in February before of the general elections.

They want the standard deduction to be increased, the basic exemption level to be raised, and the tax rates to be reduced. Financial analysts believe that although the government may make some tax changes, the advantages will mostly come from the new minimum exemptions tax framework.

Increase the Rs 5 lakh basic exemption level.

Under both the previous and new tax systems, the basic exemption limits, or income levels below which no tax is due, are Rs 2.5 lakh and Rs 3 lakh, respectively.  It is anticipated that the new tax system would increase the cap to Rs 5 lakh.

"Those in higher tax rates will benefit from this by paying less in taxes, but it won't have a significant effect on the government's ability to collect taxes or the size of the tax base. If this decision is announced, those in the tax band of Rs 15-20 lakh, in my opinion, might save between Rs 50,000 and Rs 60,000," states Mayank Mohanka, a chartered accountant and the founder-director of TaxAaraam India, a tax consulting company.

Add a new tax bracket of Rs. 15-20 lakh.

Financial advisors and many taxpayers have this demand at the top of their lists. Under the new tax system, taxable earnings up to Rs 15 lakh are subject to a 20% tax rate; incomes beyond Rs 15 lakh are subject to a 30% tax rate. There isn't a 25 percent tax bracket. Therefore, there is room to create a further group for salaries between Rs. 15-20 lakh. Then, taxable revenues over Rs 20 lakh would be subject to the 30 percent tax rate, according to Pankaj Mathpal, founder of the financial advising business Optima Money Managers.

Continue to pay home loan interest or HRA on the new terms.

The availability of the house rent allowance (HRA) and home interest tax advantages under the previous tax regime are the main obstacles to the transition to the new tax system. These serve as incentives to continue under the previous system instead of section 80C advantages. "Rental housing is a fundamental need. More than 70% of taxpayers adhering to the previous tax system will switch to the new one if allowed by the new one. According to Mohanka, the government need to permit the HRA or the interest deduction on house loans within the limited exemptions regime.

Raising the equity LTCG tax threshold to Rs. 2 lakh from Rs. 1 lakh

Long-term capital gains on the sale of equity shares or mutual fund units that exceed Rs 1 lakh in a single year are subject to a 10% tax as of the financial year 2018–19. "The barrier was established more than six years ago. According to Mathpal, the government may think about increasing the cap to Rs 2 lakh.

The meaning of "speculative business" in finance and operations may resurface.

Although the Budget is expected to provide good news to individual taxpayers, individuals should also be ready for bad news. Retail involvement in futures and options (F&O) trading is seen as needing to be curtailed. Based on our observations, over 80% of taxpayers face losses in this particular area. It's possible that the government may classify F&O trading as speculative activity once again. They may already deduct F&O losses from their income from their wage or other sources, but this is not possible if the activity is deemed speculative, according to Mohanka. In this instance, they may only deduct F&O losses from profits realized from trading in this sector.