BAJAJ BROKING
July 15, 2024
8 mins read
If you are a salaried individual, you can’t remain unaffected by the upcoming Union Budget 2024, which will be presented on July 23. After all, this budget can turn out to be a significant event for several salaried individuals like you. This is the first budget of the new government at the centre, formed by the BJP and its allies.
The government knows that salaried individuals are one of the highest contributors to overall direct tax collections. These individuals are at the heart of India’s consumption story.
Therefore, it is expected that Finance Minister Nirmala Sitharaman will announce several favourable measures for salaried individuals in the country. To begin with, the government may make announcements to make the new tax regime more attractive to taxpayers than it is currently.
As of now, people can choose between the old tax regime and the new tax regime while filing income tax returns. Many individuals still opt for the old regime because it offers several deductions and exemptions, most of which are not offered by the new regime. Meanwhile, the new regime offers lower tax rates than the old regime.
All over India, the taxpayers are eagerly waiting for the budget, hoping that Sitharaman will provide them with some relief. So, if you are a salaried person, we suggest you read on as we decode the 6 things salaried taxpayers want from Budget 2024!
The new concessional personal tax regime offers lower tax rates to salaried individuals than the old regime. However, the new regime does not offer several deductions and exemptions offered by the old regime.
Moreover, from FY 2023-24 onwards, the new tax regime has become the default tax regime if a taxpayer does not select a tax regime. This clearly shows that the government wants more people to opt for the new regime. Experts think that the government should offer more concessions to people under the new tax regime so that more people opt for it.
As of now, the new tax regime does not provide for deductions or exemptions for housing rent allowance (HRA), leave travel allowance (LTA), interest on home loans for houses occupied by salaried individuals, and medical insurance premiums.
When the finance minister presents the Union Budget, she may allow for some of these deductions/exemptions. If the government gives more money in the hands of taxpayers through such exemptions, they may consume more, which can be good for the economy as well.
Moreover, some of these exemptions (e.g., interest on home loans) provide a sense of security to taxpayers because they feel like investing in a house, which is a long-term asset. This is required for their financial well-being and emotional security. Besides, with more exemptions, people will feel more inclined towards the new tax regime.
Currently, salaried individuals in India can avail of a standard deduction of ₹50,000. This means an amount of ₹50,000 can be deducted from their annual taxable salary and income tax is levied only on the rest.
That said, the last time the standard deduction amount was raised was way back on April 1, 2020. Four years have gone by since then. Considering that inflation is between 5-10% on average in India, the value of ₹50,000 is significantly lower today than what it was in 2020.
Hence, it is expected that the government may consider increasing this limit of standard deduction. There could be several ways to do it. First, the government may allow individuals to index it. This means they can increase the amount of standard deduction by the rate of inflation every year.
By doing this, salaried individuals can ensure that inflation does not impact the benefit of the standard deduction for them. Some experts even expect the government to increase the standard deduction from ₹50,000 currently to ₹1 lakh in the new tax regime.
The experts are expecting ₹1 lakh under the new tax regime and not under the old tax regime. They do not expect the government to significantly change the old tax regime because the government wants people to move to the new tax regime. At the moment, it’s not clear what exactly the government will do.
Therefore, on July 23, you should track the budget online on Bajaj Broking’s website and watch out for announcements related to the standard deduction.
From policies to schemes, income tax rate slabs to special privileges and more, there’s a lot to make sense of ahead of this year’s Budget. To simplify what is perhaps the most important government announcement, Bajaj Broking brings you #BudgetSimpleHai!
Head over to any of our social handles, from Instagram, Facebook, YouTube, X (formerly Twitter), Spotify and more, and tune in to our special posts, videos, podcasts and more to make sense of Union Budget 2024.
Kyunki Bajaj Broking ke saath, #BudgetSimpleHai
Taxpayers are expecting Sitharaman to announce certain important changes when it comes to the calculation of HRA exemption. Let’s understand the context in which these expectations have emerged.
As of now, only four cities (i.e., Delhi, Mumbai, Kolkata, and Chennai) are considered metro cities when it comes to HRA exemption calculations. As a result, 50% of the sum of your basic salary and dearness allowance (DA) could be deducted from your HRA to reduce your tax burden if you are living in a metro.
However, if you are staying in a non-metro, this 50% limit gets reduced to 40%. Cities like Bengaluru, Gurgaon, Pune, Hyderabad, and many more are considered non-metros for this purpose.
This does not show a realistic picture of the situation. Today, Gurgaon has developed so much that real estate in many parts of Gurgaon is more expensive than that in Delhi. Besides, Bengaluru, Pune, and Hyderabad have developed so much that they deserve the status of a full-fledged metro.
Therefore, it is expected that the budget will increase the exemption limit from 40% to 50% for those cities of India, which deserve to be called a metro due to the pace of their development, availability of work-related opportunities, and general price levels.
As of now, there are some provisions which provide certain tax exemptions to salaried individuals on the value of free non-alcoholic beverages and free food provided to them by their employers during their working hours.
Some employers even give them electronic meal cards, which they can use only at eating joints. Currently, this allowance is non-taxable up to ₹50 per meal. Over the years, food has become so expensive in India that it is nearly impossible to have a meal at a dhaba or a roadside restaurant even in a small town for anything less than ₹100-150 per meal per person.
Hence, ₹50 per meal exemption is not in line with prevailing food prices in India. Therefore, it is expected that the finance minister may hike this limit.
A significant number of salaried employees in big cities, like Delhi, Mumbai, Chennai, Bengaluru, Hyderabad, Pune, etc. get this allowance from their employers. If the government increases this exemption’s limit, they will certainly benefit.
Ever since the onset of COVID-19, many companies have started allowing their employees to work from home. Once the number of COVID-19 cases reduced, quite a few companies started calling their employees to the office. However still, an overwhelming number of companies allow their staff to work from home.
Some employers even allow their employees to work from anywhere. Some employers have adopted a hybrid mode, wherein employees work from home for a few days in a week and go to their office for the rest of the days.
When an employer allows its workforce to work from home, it significantly changes its cost structure and even the compensation of employees. For example, several companies provide one-time home-office setup costs to their employees.
This is provided to those working from home or choosing the hybrid model. Currently, there are no provisions in Indian tax laws which talk about how such reimbursements to employees should be treated.
Given that work-from-home and hybrid work is a reality, it is high time that the budget throws clarity on this issue.
The limit for exemption of child education allowance under tax laws is out of sync with reality. Consider this: the Income Tax Act allows exemptions of ₹100 per child per month on account of education from the salary of parents. In addition, the act allows ₹300 per child per month exemption for hostel expenses. Both these exemptions are available for up to two children.
Most educational institutions charge way more than ₹100 per month education fees and ₹300 per month hostel expenses. The inflation in education tends to be much higher than inflation for other products and services.
This means that every year the amount of money people spend on the education of their children increases at a much higher rate than the expenses on groceries, consumer appliances, etc. Therefore, it is expected that the government may increase the exemption for the expenses incurred by people on their children’s education.
For this, the government should do a reality check and see how much educating a child costs in big cities, small towns, and villages in India.
If you are a trader with a demat account, the budget day is going to be extremely important for you. Needless to say, you should follow the budget online. Keep an eye on Bajaj Broking’s website for any announcements that will have a direct impact on the stock market.
If you have investments in equities, watch out for sector-specific announcements. There is a possibility that the budget will announce some relief for salaried individuals. In that case, you should figure out sectors that will gain if consumption increases in the economy.
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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It’s a bit tough to say what such changes will be. However, some experts have said that the government may consider increasing the income tax exemption limit under the new regime from ₹3 lakhs annual income now to ₹5 lakhs.
It is expected that the government may increase the standard deduction, but it is tough to say how much the increase will be. Some other deductions (e.g., deduction on interest on home loans for houses occupied by salaried individuals) which are currently not available under the new tax regime may become available.
Currently, taxpayers face issues due to pre-filled income tax returns, which are pre-filled based on the information with government agencies. Sometimes such data is either incomplete or incorrect. It is expected that the budget will simplify this process.
The government may start allowing for some of the allowances and reimbursements like HRA and LTA. However, these are just expectations. For better clarity, you should wait for July 23 and track budget-related updates online on that day.
Currently, no tax deductions are allowed under Section 80C under the new tax regime. However, under the old tax regime, people can opt for deductions under Section 80C for their investments in PPF, NSC, ELSS, etc. As many taxpayers prefer taking this benefit under the old regime, the government may offer these exemptions under the new regime.
If the finance minister reduces the tax burden of salaried individuals, it will automatically result in more savings and investments. Some people are expecting the government to increase the amount of tax-deductible interest from savings accounts from ₹10,000 per year currently to ₹25,000.
It’s tough to say what exact steps will be announced in the budget. However, it seems that the government would like to give more money in the hands of taxpayers so that they can deal with inflation better.
The government may consider providing a deduction for interest on home loans for self-occupied houses by salaried individuals under the new tax regime. You should track the budget online on July 23 to get updates on this aspect.
It’s tough to say what plans the government has at this moment. However, people expect the government to provide a tax deduction for the medical health insurance premium.
The industry has demanded that the government should work on improving the skill sets of youths so that they can easily get jobs, especially in the technology sector. Let’s see what the government does on this front.
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