Expectation of concession in income tax, major changes possible in the new tax regime

It is expected that there will be relief in terms of income tax in the General Budget 2024 to be presented in the coming February. This time the government can take steps towards making the new tax regime more attractive and simple. This may include many provisions like changes in tax slabs, reduction in rates and increasing the standard deduction. This budget is being considered very important for the middle class amid rising inflation.

Emphasis on new tax regime

The government’s main focus is on keeping the new tax regime exemption-free, although raising the limits and changing slabs are also being considered to provide relief to taxpayers.

• There is a possibility of giving more concessions for health insurance and pension.
• Proposals to reduce the liability for high income group taxpayers are also under discussion.
• There has also been a growing demand for abolition of the old tax regime as it is based on allowances like home loans and house rents.

Changes made in the last budget

Finance Minister Nirmala Sitharaman had increased the standard deduction for salaried employees to Rs 75,000 and revised the tax slab in the last budget. Taxpayers benefited from these reforms to the tune of Rs 17,500. This time there is discussion that the standard deduction can be increased further, which will save more money in the pockets of the middle class.

Major proposed changes and their impacts

1. Change in top tax rates

Currently, income of Rs 12-15 lakh is taxed at 20%, while income of Rs 15 lakh or more is taxed at 30%.

• If the tax rate on income of Rs 15 lakh or more is reduced from 30% to 25%, the government may suffer a revenue loss of Rs 74,000 crore to Rs 1.1 lakh crore.
• Similarly, imposing 15% tax rate on income of Rs 10-15 lakh could result in a loss of Rs 16,000 crore to Rs 50,000 crore to the government.

2. Health Insurance and NPS Exemption

• An additional exemption of up to Rs 50,000 can be given for health insurance and up to Rs 75,000 for NPS (National Pension Scheme) contributions.
• The revenue loss due to tax rate cuts with these concessions could range from Rs 85,000 crore to Rs 1.2 lakh crore.

3. Benefits on Home Loan

Suggestions have also been given to provide benefits for home loans in the new tax regime. However, officials are against such relaxations as it would make the new system as complex as the old one.