The government is expected to increase the standard deduction, potentially up to ₹1,00,000, and raise Section 80C exemption to ₹2 lakh. Income tax exemption may rise to ₹5 lakh, providing relief to individuals with incomes up to ₹8.5 lakh.
Experts propose increasing the tax-free NPS withdrawal limit to 80% and adding cities like Bengaluru to the metro list for HRA exemptions. The Section 80D deduction limits for medical insurance premiums might also rise, promoting greater healthcare access and insurance adoption.
Here are seven income tax benefits to expect, aimed at alleviating financial burdens and enhancing savings:
Standard deduction: Given the current economic conditions, the government is expected to moderately increase the standard deduction. Optimistically, this could go up to Rs 1,00,000, while a moderate scenario projects Rs 75,000. Experts believe the increase may range from Rs 60,000 to Rs 1,00,000.
Section 80C exemption: Salaried individuals can use Section 80C exemptions to reduce taxable income by ₹1.5 lakh annually. Experts expect this limit to increase to ₹2 lakh, offering significant relief. Section 80C allows deductions for specific investments and expenses, helping taxpayers lower their tax liability.
Increase income tax exemption limit: The government may raise the income tax exemption limit to ₹5 lakh from ₹3 lakh in Budget 2024. If implemented, individuals with annual incomes up to ₹8.5 lakh could potentially pay no income tax, offering significant relief under the new tax regime.
Also Read: Union Budget 2024: Key Sectors in Focus for India’s Economic Leap
National pension scheme: Experts advocate raising the tax-free NPS withdrawal limit from 60% to 80% at maturity to attract more investors. They also urge increasing the additional income tax deduction under Sec 80CCD 1B, aligning NPS with other retirement schemes like EPF for enhanced tax benefits.
Tax rate reductions: The government may lower the top tax rate from 30% to 25% in the new tax regime and raise the threshold for the highest tax rate from ₹10 lakh to ₹20 lakh in the old tax regime.
- The exemption limit is ₹5 lakh.
- Taxable income between ₹5 lakh to ₹6 lakh is taxed at 5%.
- Taxable income between ₹6 lakh to ₹9 lakh is taxed at 10%.
- Taxable income between ₹9 lakh to ₹12 lakh is taxed at 15%.
- Taxable income between ₹12 lakh to ₹15 lakh is taxed at 20%.
- Taxable income above ₹15 lakh is taxed at 30%
House Rent Allowance (HRA): Experts anticipate adding Bengaluru, NCR, Pune, and Hyderabad to the metro list for HRA exemption. Currently, HRA exemption is 50% of basic salary in metros like Delhi and Mumbai, and 40% in other cities. Including these growing cities would ease the tax burden for many salaried taxpayers.
Increase in the deduction limit for medical insurance premiums: There’s an expectation to increase the Section 80D deduction limits for medical insurance premiums. The current limits of ₹25,000 for individuals and ₹50,000 for senior citizens may rise to ₹50,000 and ₹75,000, respectively. Extending these benefits to the new tax regime would promote equal healthcare access and encourage health insurance adoption.
