Anticipated Changes in Indian Interim Budget 2024: Taxpayer Expectations

Introduction

As Lok Sabha elections are due in India in early 2024, the government shall be announcing an interim budget instead of a full-fledged budget, which shall function as a transitional financial plan for the remaining months of government in power.

After the elections a new full-fledged budget shall be introduced by the government with new changes, that means once the new government is elected, they shall present the full budget in June 2024. Interim Budget 2024 is scheduled to be presented by our Finance Minister Mrs. Nirmala Sitharaman on 1 February 2024 in the lower house of India’s bicameral Parliament.

Taxpayers across the country are eagerly awaiting announcements that could impact their financial landscape.

Let’s delve into some of the alterations and additions expected by taxpayers in the forthcoming interim budget

1. Long-Term Capital Gain - Ceiling: The current threshold for computing tax on Long Term Capital Gain on the sale of equity shares, equity-oriented mutual funds, and units of a business trust is INR 1,00,000/-. There is a prevailing expectation that this ceiling limit should be increased to INR 2,00,000/-. Such a move is anticipated to provide incentives to taxpayers and boost equity investments in the country.
2. Transparency in Asset Classification for Capital Gain: The current capital gains tax regime in India is marred by complexity, posing challenges for taxpayers. The expectations from the government include streamlining the classification of equity and debt instruments, unifying tax treatment for listed and unlisted securities, and simplifying indexation provisions. Additionally, a call has been made for a simplified investment regime to enable taxpayers to claim relief from the Capital Gains tax.
3. Transparency in Withholding Tax Sections: With over 30 sections dealing with distinct categories of payments to residents and non-residents, the withholding tax system in India is complex. Taxpayers are advocating for a simplified withholding tax regime, a long-standing demand that, if met, could reduce confusion and streamline tax processes.
4. Enhancing Standard Deduction in Old Tax Regime: Individual taxpayers under the old tax regime were allowed a standard deduction of INR 50,000/-. There is a growing call to further increase the standard deduction to at least INR 1,00,000/- in 2024. This demand has gained momentum, especially after the standard deduction became a part of the new tax regime in the Finance Act of 2023.
5. Deduction on Payment of Interest on Home Loan: The deduction for interest on home loans under Section 24(b) has been capped at INR 2,00,000/-. With the inflation in the real estate sector and the high proportion of interest in the initial years, taxpayers are requesting an upward revision of the threshold for deduction from INR 2,00,000/- to INR 3,00,000/-.
6. Hike in Limit under Section 80C: Taxpayers perennially request an increase in the deductions limit of INR 1,50,000/- under Section 80C. With the current limit stagnant for nine assessment years and considering inflation, the expectation is to raise the limit to at least INR 2,50,000/-.
7. Streamlining TDS Process for NRI Property Buyers: The current TDS process for property buyers requires the withholding and depositing of 1% of the total purchase value as Tax Deposit at Source (TDS) when the property value exceeds INR 50,00,000/-. For Non-Resident Indian (NRI) sellers, the process is cumbersome. Taxpayers are urging the government to simplify the TDS process for NRI property buyers, aligning it with the process for resident sellers.

Conclusion

As Finance Minister Mrs. Nirmala Sitharaman prepares to present the interim budget on February 1, 2024, taxpayers are hopeful that their expectations will be addressed.

The proposed alterations and additions, if implemented, could significantly impact the financial landscape for individuals and investors in India. The eagerly awaited budget announcement will shed light on the government’s fiscal policies and its commitment to addressing the concerns of the taxpayers.

Disclaimer: Views and opinions are personal, based on past analysis, I have just expressed my expectations from Budget 2024