Income Tax Budget 2024 Expectations: 5 Things Salaried Taxpayers Should Know

The salaried class has high expectations from the upcoming Union Budget 2024, as there was little tax relief for taxpayers in the interim budget presented earlier this year. With the economy facing headwinds from the global slowdown and high inflation, citizens expect significant tax reforms in Budget 2024 to boost savings and purchasing power, especially for the middle class.

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Experts anticipate that the government will address the shortcomings of the new tax regime introduced in Budget 2023 to replace the old tax structure. The new regime has yet to attract the expected number of taxpayers.

While changes in Budget 2023 persuaded some taxpayers to switch, the shift is still not as high as anticipated. The government may consider reducing the highest tax rate of 30% to 25% in the new regime to make it more appealing.

A reduced top tax rate of 25% could persuade more individuals to transition to the new regime, as the highest rate currently makes it less beneficial for high-income groups than the old structure.

However, some experts argue that more than just cutting the top rate may be needed to prompt a mass shift to the new structure.

In addition to top rate cuts, experts suggest that the income threshold for the highest tax slab may be raised under the old regime and enhanced deduction limits.

The government can look at increasing the income threshold for a 30% tax rate from the current ₹10 lakhs to ₹20 lakhs under the old regime. Standard deduction and investment limits under Section 80C could also be raised as interim relief measures.

Higher exemption thresholds would reduce tax incidence for middle-income groups in particular. This could put more disposable income in the hands of the large consuming class of salaried taxpayers.

Under the old tax structure, salaried individuals expected an increase in the standard deduction from the current ₹50,000 per year to provide higher tax savings.

Enhancing the standard deduction will give middle-class taxpayers a much-desired savings boost. They are currently struggling with high consumer inflation, exceeding the 6% average.

With retail inflation at uncomfortable levels, an increase in the standard allowance can offer some cost-of-living relief. Especially for lower middle-income groups, higher standard deductions along with rebates could enhance take-home pay to maintain purchasing capacity.

Another popular demand from taxpayers is increasing the exemption limit for capital gains earned from asset sales.

Many retail investors hope that the exemption limit for Long-Term Capital Gains (LTCG) will be enhanced from the current ₹1 lakh to ₹1.5 lakhs or ₹2 lakhs in the Union Budget 2024.

With growing interest in trading among the youth and middle class, a higher LTCG exclusion will allow small investors to save more on capital gains.

Salaried individuals also expect higher house rent and transport allowance exemptions to provide relief from rising rental and fuel expenses, especially in metro cities.

The house rent allowance (HRA) exemption limit of 50% of the basic salary currently in metro areas must be improved. Given sharp rent rises, the budget may raise it to 60% or more for metro cities.

Beyond HRA, conveyance and leave travel allowances are also expected to see enhancements. This would help taxpayers manage the significant rise in housing, travelling, and other everyday living expenses in the last few years.

Salaried taxpayers expect more significant tax savings and a consumption boost from personal income tax proposals in the upcoming Budget 2024. The government also aims to encourage spending to support economic growth amidst global headwinds.

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Union Budget 2024 Expectations

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