Budget 2024: HRA to Child Education, Middle Class' Tax Exemption Wishlist Foe Nirmala Sitaraman

Budget 2024: The Union budget, which will be presented on February 1st, officially began on January 24th when the finance minister served "halwa" to participants in the budget-making process. But this will only be a "vote on account," not the complete annual regular budget, which is scheduled to be presented following the general elections in April and May of 2024. As a "vote on account," the finance minister has already stated that there won't be any "spectacular budget announcements" on February 1.

Vote on Account in Election Years

Instead of passing a complete budget during election years, the government requests authorization to take money out of the "consolidated fund of India" by passing a "vote on account" through a "interim budget." With this withdrawal, it can adhere to the election code of conduct and pay administrative costs until the next government is constituted.

Comparing the Union Budget to Delicious "Halwa"

We can only hope that, like the delicious "halwa," the upcoming Union budget 2024 (expected to be presented in July 2024 as the "full budget" by the incoming dispensation) is being served with all the necessary components of a strong economy and stable taxation regime, even though no spectacular budget announcements are anticipated on February 1st. The forthcoming budget should place a high priority on increased capital expenditures for both digital and physical infrastructure, but with a close watch on the fiscal deficit.

Encouraging Transition to the New Personal Taxation System

In the area of personal taxes, the government is pushing for an increasing number of taxpayers to convert to the new system in order to simplify income tax return filing and assessments resulting from the large number of assessee deduction claims that were allowed under the previous system.

The primary obstacle preventing these individual taxpayers from transferring to the new personal taxation regime, however, is the requirement that salaried individuals forgo the HRA deduction and the deduction for interest paid on home loans taken out for self-occupied property in order to take advantage of the lower personal tax rates under the new regime.

Essential Shelter Deductions

Therefore, by including deductions for HRA and interest paid on home loans taken out for self-occupied property, the new tax regime can be made more enticing. Since a roof over one's head is a basic need, all expenses for house rent or home loan interest should also be deductible under the new personal tax system.

Advocating for Revised Exemption Limits on Children's Education

Under the previous personal tax scheme, a nuclear family could only have a maximum of two children. The current exemption limits for children's education allowance and hostel expense allowance are ₹100 and ₹300 per child, respectively, every month. Regarding the children's fundamental need for a primary education, these exemption restrictions haven't been updated in a very long time.

Therefore, it is imperative that these exemption limits be revised to reflect the actual, realistic cost inflation index for education in elementary schools and dormitories. Furthermore, the cost of a child's education is a basic necessity, just like housing rent, and as such, it must be permitted under the new personal tax regime with lower tax rates.

Charitable Contributions

Any deduction under section 80G for contributions given to the "Shree Ram Janm Bhoomi Teerth Kshetra" Trust is only permitted under the previous personal tax system. As a particular gesture, the government need to think about permitting the same under the future administration as well.

Moreover, the advance tax installments that require payments of 25%-50%-75% rather than the current 60%-75%-90% might benefit from some rationalisation. This might provide taxpayers with greater disposable income in addition to guaranteeing quicker returns.

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