Budget 2024: The interim “Budget 2024,” which is scheduled to be published on February 1, 2024, will allow the government to control revenue and spending until a new government is chosen in the parliamentary elections that are scheduled for later this year. There won’t be any “spectacular announcements” in the interim budget, according to Finance Minister Nirmala Sitharaman. Therefore, there is little hope for any big reforms.
Economic Performance Amidst Inflation
Even so, considering that the economy has performed well in an otherwise inflationary climate, certain announcements regarding modifications may still be made in order to increase taxpayer savings and eliminate any anomalies that may exist in the current provisions. This article has covered a few of these possibilities.
Current Tax Rates and Simpler System
The tax rates that are in place for different taxpayers are currently at somewhat moderate levels. In the previous budget, the government also instituted a new, simpler tax system for individuals. It is therefore doubtful that the government will alter tax rates much, particularly for individual taxpayers.
However, many stakeholders believe that the 25% maximum rate of surcharge that applies to individuals is excessive. Although this rate only applies to those in the highest tax bracket, the government may decide to lower it in order to lower the highest rate that can be applied to an individual.
Make in India Objective
Additionally, it is anticipated that the government would prolong the advantageous tax rate of 15% for newly established manufacturing firms past the current expiration date of March 2024. This would go be consistent with the aim of supporting Make in India.
Raising Restrictions on Stock Market-Linked Investments
The government has progressively stopped offering incentives for investment-linked deductions as a matter of policy. The limit of Rs 1,50,000 imposed on them is already regarded as being insufficient in light of inflation and rising income levels. But it has also caused the domestic savings rate to decline.
In order to combat that, the government can think about raising the restrictions on stock market-linked investments including mutual funds, unit-linked insurance plans, and exchange-traded funds (ETFs). Furthermore, considering the rise in medical expenses, raising the ceiling on individual deductions for health insurance premiums may also be taken into consideration. These deductions are currently capped at Rs 25,000; for elderly citizens, this amount is raised to Rs 50,000.
Potential Increase in Cap
The government may take into account expanding public funding options for infrastructure projects in light of the significant infrastructure push that is being planned across the nation. Individuals can already claim exemptions from capital gains tax payable on the sale of property by investing up to Rs 50 lakhs into NHAI bonds.
In view of the increasing cost of real estate, overall rates of inflation, and the need to stimulate indirect infrastructure finance, the government may decide to raise this cap to Rs 1 crore (or at least Rs 75 lakh).
Potential Relief for Homebuyers
First-time homeowners are currently suffering from high house loan interest rates and a Rs 200,000 cap on the amount of interest that may be deducted from loans for self-occupied property. This might be able to lessen the rising cost of financing.
Investors now have to pay 10% long-term capital gains tax on the sale of listed shares in addition to “securities transaction tax.” Given the history of STT imposition, the public may find these rates unfair, but the government may not be motivated to adjust them in this interim budget. Just before the parliamentary elections, it would be fascinating to observe the strategy the government will take and the scope of the changes it plans to make to the tax rules.
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