Anticipations for Budget 2024: Experts Advocate for Tax Relief for Salaried Taxpayers
As Finance Minister Nirmala Sitharaman prepares to unveil the comprehensive budget for the current financial year later this month in July, there is a growing chorus of voices among experts and financial analysts calling for the government to consider tax relief measures specifically for salaried taxpayers. This call for reform comes in the wake of India's impressive economic growth trajectory, which, despite its overall success, has not equally benefited the large middle-income group, a demographic predominantly composed of salaried individuals.
This disparity in per capita income growth has been a significant factor contributing to a slowdown in private consumption, an essential driver of sustained economic expansion. Economic experts argue that implementing tax relief for salaried taxpayers could serve as a catalyst for increased consumer spending, which in turn could rejuvenate the consumption levels necessary for robust economic growth.
Sources within the finance ministry have indicated that the government is actively deliberating various potential tax relief measures, with a decision anticipated shortly before the formal presentation of the budget. This upcoming budget, which is set to be unveiled during the third week of July, coincides with the monsoon session of Parliament and will mark Finance Minister Nirmala Sitharaman's seventh consecutive budget presentation. It will also be the first budget of Prime Minister Narendra Modi’s third term in office, setting the stage for what could be a pivotal moment for fiscal policy adjustments.
Expectations for Tax Changes in Budget 2024
As the date for Budget 2024 approaches, there is a high level of anticipation and speculation about the potential tax benefits and reforms that Finance Minister Nirmala Sitharaman may announce for taxpayers. Among the various expectations, one of the most anticipated changes is an increase in the standard deduction limit for salaried individuals, a measure that many experts believe is overdue.
The standard deduction, which was reintroduced in Budget 2018 at a limit of Rs 40,000 per year, replaced two earlier deductions: a travel allowance of Rs 19,200 and a medical deduction of Rs 15,000 per annum. In the interim budget of 2019, this standard deduction limit was increased to Rs 50,000. However, there has been a persistent demand from taxpayers and financial experts alike for a further increase in this limit. The combined total of the deductions that were replaced amounted to Rs 34,200, meaning the current standard deduction of Rs 50,000 offers only a marginal increase in tax savings for salaried individuals.
Rahul Charkha, a Partner at Economic Laws Practice, emphasized the expectation for a revision of the standard deduction limit, stating, “The middle class, especially the salaried individuals, are eagerly hoping for substantial tax relief in the forthcoming budget. The standard deduction of Rs 40,000 was introduced in 2018, and it was raised to Rs 50,000 in 2019. It has been nearly five years since this deduction was last revised, and there is a growing demand for an increase to reflect current economic conditions.”
Echoing this sentiment, SR Patnaik, Partner at Cyril Amarchand Mangaldas, added, “There is a significant push from various quarters to raise the standard deduction from the current Rs 50,000 to a higher level. The existing limit has remained unchanged since 2019, and this adjustment would provide much-needed relief to taxpayers who are struggling with inflation and modest salary increments.”
In addition to this, there are proposals under review that could potentially involve raising the exemption limit under the new tax regime from Rs 3 lakh to Rs 5 lakh per year. Another option being considered is the elimination of tax liabilities on annual income up to Rs 8 lakh, which would align the tax structure with the eligibility criteria for the Economically Weaker Section (EWS) benefits.
Amit Bansal, Partner - Direct Tax at Singhania & Co., commented on the current situation by saying, “While there is considerable speculation about potential changes in the upcoming budget, it is important to note that the recent developments are mainly related to cabinet approvals rather than introducing new provisions or changes. Therefore, taxpayers should temper their expectations and understand that this approval process does not signify new relief measures or adjustments beyond what was previously outlined in the fiscal plans.”
The presentation of the Budget for 2024-25 will thus be a significant event, with Finance Minister Nirmala Sitharaman set to address a range of economic issues and opportunities for reform. The budget is expected to be a key reflection of the government's fiscal strategies and priorities for the year ahead.
