As Finance Minister Nirmala Sitharaman prepares to unveil the Union Budget 2024, salaried taxpayers have high expectations for reforms that could significantly impact their finances.
Salaried taxpayers are anticipating an overhaul of the income tax slabs. While the Union Budget 2023 made notable adjustments to the new personal tax regime—such as increasing the basic exemption limit to Rs 3 lakh from Rs 2.5 lakh and reducing the surcharge for high-income earners—the old tax regime remained unchanged. There is hope that the upcoming Budget will introduce significant upgrades to the old tax regime slab structure, potentially raising the income tax exemption limit to Rs 5 lakh, aligning it with the new tax regime. Additionally, increasing the standard deduction from the current ₹50,000 is expected to provide further relief.
Adjusting HRA rates
With the rental market in major Indian cities experiencing a post-pandemic resurgence, there is a strong case for revisiting the House Rent Allowance (HRA) deduction. Metro cities have seen substantial rental growth due to economic expansion and the shift to hybrid work models. Currently, the HRA exemption is limited to 50% of the basic salary for a few major cities and 40% for others. Expanding the 50% allowance to more cities, such as those in the National Capital Region (NCR), , Pune, and Hyderabad, would provide relief to a larger segment of the population.
Home loan interest deduction
Addressing the government’s vision of ‘housing for all,’ there is a call for the reintroduction of section 80EEA of the Income Tax Act, 1961. This section allowed first-time home buyers to deduct up to ₹1.5 lakh per annum of interest paid on home loans. The benefit, which was not extended beyond March 2022, is crucial for promoting affordable housing. Reintroducing this deduction would align with the government’s objective and provide significant relief to first-time home buyers.
Promoting electric vehicles
In line with the government’s green growth agenda, the promotion of electric vehicles (EVs) is a priority. To support this, taxpayers are hopeful for the extension and enhancement of the deduction under section 80EEB of the Income Tax Act, 1961. This section previously allowed a deduction of up to ₹1.5 lakh per annum for interest paid on loans for the purchase of electric vehicles, but it was not extended beyond March 2023. An increased limit of ₹2 lakh per year would further encourage the adoption of EVs.
