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Will FM Sitharaman Bring Tax Relief for Middle Class in 2024

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The middle-class Indians have crossed their fingers in unison, looking forward to saving a bit more of their money, this year around. With the Union Budget 2024 round the corner, Finance Minister Nirmala Sitharaman is at the helm, and everyone is whispering—about one thing: budget income tax relief. It's almost like everyone is holding out for the payoff scene in an exciting movie, but the stakes are higher here though.

Analysis of Current Taxation Policies

At this juncture, the Indian income tax structure resembles finding your way through a puzzle: confusion, Complexity, and yes—the result of trying to figure them out would be a dead end for sure. The squeeze is not on the commoners only; the higher middle class is feeling the heat of it more.

The following list captures the essence of the current taxation system.

  1. Higher Rates of Taxes: The existing regime is one of high tax rates and it results in a big portion of the middle class income to end up as tax payments.
  2. Exemptions: The present regime of taxation allows very few exemptions and deductions, which are too minimal to enable a taxpayer to reduce his taxable income substantially.
  3. Complicated Structure of Filing: The process of filing of taxes itself is cumbersome wherein one has to push through complicated forms and regulations.
  4. Minimal Relief Measures: The past budgets did bring in minor tweaks and relief measures; however they were not strong enough to result in any meaningful relief.
  5. Targeted Benefits: The current tax policies do not seem to cater to the unique financial pressures on the middle class. By unique challenges we mean education costs, house loans, and other such expenses that are often specific to the middle class families.

A lot of hue and cry has been heard from people regarding the high tax rates and minimal exemptions. The question is, will the upcoming budget really be one with a big difference?

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Potential Changes in Income Tax Structure

What really could change now is some real tweaks in the income tax structure. The basic exemption limit is rumoured to be under consideration for a possible raise. It is a bit modest at 2.5 lakhs INR as it is now, for residents who are under 60 years of age. Imagine if they bumped it up a bit—suddenly, the idea of spending that saved money on a nice vacation or maybe just a better brand of instant coffee seems within reach.

As far as expectations go, these are the potential aspects where changes are likely to be announced in the upcoming budget.

  1. Change in Tax Slabs: A revision of tax slabs favouring the middle class individuals can help reduce the overall burden of taxes.;
  2. Increased Deductions: The budget may declare or improve deductions for expenditure on education, health, and housing, thereby reducing the tax liability of middle-class taxpayers.
  3. Simplification of Tax Filing Procedure: Making the tax filing procedure more user-friendly may simplify the process of filing taxes as well as reduce the hassle and complexity associated with tax compliance.

There has also been a murmur for changing the tax slabs to offer some tax relief for middle class. People hope that the overall tax burden drops a little and maybe the filing process will be simplified. I mean, wouldn't you love a tax form that doesn't require you to hold a degree in advanced mathematics to fill out?

Implications for Middle-Class Taxpayers

The basic exemption limit going up would imply huge savings. And if you have more disposable income, this would also mean increased spending power; therefore, in a way, this can act like an injection into the economy. You might finally get that second-hand car or start investing in something other than your cousin's shady business ventures.

This is how the expected changes can impact the middle class if they are indeed announced. 

  1. Rise in Disposable Income: The revised exemption limits and new tax slabs would definitely give more spending money to the middle-class taxpayer for daily needs and leisure activities.
  2. Better Savings and Investments: Reduced tax liability, therefore, assured better savings and more money to be invested in ensuring financial security and consequently planning for the future.
  3. Better Quality of Life: More disposable income impinges positively on better spending for education, healthcare, and lifestyle upgrading of families.
  4. Economic Growth: This increased middle-class spending can spur economic growth by providing a meaningful stimulus to demand for goods and services, which eventually benefits the economy at large.
  5. Greater Financial Stability: Tax relief for the middle class can be a cushion during financial emergencies and uncertainties, ultimately leading to greater financial stability.

A rearranged tax structure would definitely be a welcome change. With lower tax rates in higher slabs, you could hold back more of your hard-earned income. This could be like a hike in your salary but without all the negotiations and bargaining that comes with a salary appraisal at work, at least for most of us. Besides, you might even be able to finally crack that code and file your returns yourself, if the process becomes simple enough. Think of the accountant’s fees that would save up.

Conclusion

The next budget thus comes with a lot of promise. People have a positive attitude—cautiously mixing optimism with a good deal of scepticism—with the finance minister Nirmala Sitharaman at the helm. Now, it could turn out to be the Union Budget 2024 wherein the government would finally succumb to the clamours for budget income tax relief and incorporate those changes that put a smile on the face of the middle-class taxpayer.

Will this be the budget finally to make a difference? Well, only time will tell. Until then, keep those fingers crossed and maybe start a tax relief chant. Who knows, it might just work.

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing.

This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

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Frequently Asked Questions

What are the expectations regarding income tax relief in the upcoming budget?

Answer Field

Expectations are for a rise in exemption limits, revision in tax slabs, more deductions on expenses related to both education and health, and targeted benefits for middle-class taxpayers to bring down their overall tax liability.

How has Nirmala Sitharaman addressed income tax issues in previous budgets?

Answer Field

In past budgets, Sitharaman has provided small sops in the form of standard deductions, a new tax regime with lower rates but with fewer exemptions, and incentives for specific investments, a process by which she has tried to simplify and slightly reduce the tax load.

When will the decision on income tax relief for the middle class likely be announced?

Answer Field

The announcement of the decision on relief over an income tax bill will be incorporated with the presentation on the Union Budget, which is generally carried out during the first week of February every year.

How could potential income tax relief impact middle-class taxpayers?

Answer Field

It will have the effect of increasing disposable income, enabling saving middle-income taxpayers. This saving could then be spent on education or health investment that will lead to an increase in quality of life.

What factors influence the governments decision on income tax changes?

Answer Field

Some of these factors actually embody this delicate balance—prevailing economic conditions, fiscal deficit targets of the government, amount of required revenue, public demands, and the ease of changing political scenarios. Indeed, the government considers all these factors and more in its bid to materialise any tax reform.

What are the current income tax slabs and rates applicable to the middle class?

Answer Field

Presently, the tax rates for individuals below 60 are:

- Up to ₹2.5 lakhs: Nil

- ₹2.5 to ₹5 lakhs: 5%

- ₹5 to ₹10 lakhs: 20%

- Above ₹10 lakhs: 30%

How can middle-class taxpayers prepare for potential changes in income tax policies?

Answer Field

Staying up to date with budget related announcements, and reviewing their current investments is a good place to start. It would be advisable to even consult a financial advisor regarding the same. 

What are the implications of income tax relief on overall economic growth and consumer spending?

Answer Field

A decrease in income tax helps to increase disposable income and, as a result, spending and saving levels. This will boost economic growth, stimulate the demands of goods and services, and therefore pave the way for greater economic stability.

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