Upcoming Budget 2024: Key Personal Taxation Changes to Watch For

Here are the key anticipated changes around personal taxation:

Fiscal Deficit Targets

• FY 2023-24: 5.63% of GDP
• FY 2024-25 Target: 5.1% of GDP
  

Changes in Simplified Tax Regime

1. Standard Deduction Increase
   • Expected increase from ₹50,000 to at least ₹1,00,000.
   • Alternatively, an adjustment annually with the cost inflation index.
   • This change aims to provide relief to taxpayers and align the tax system with rising living costs.
2. NPS Employee Contribution Deduction
   • The old tax regime allows an additional ₹50,000 deduction for employees’ NPS contributions, which isn’t available under the simplified regime.
   • Allowing this deduction under the simplified regime could make it more attractive and encourage retirement savings.
3. Infrastructure Bond Deduction
   • Reintroduction of a ₹50,000 deduction for investments in infrastructure bonds.
   • This would encourage investments in critical infrastructure projects, fostering economic growth and employment.

Changes in Old Tax Regime

1. Affordable Housing Loan Interest Deduction
   • Reinstatement of the deduction of up to ₹1.5 lakh per annum for interest on home loans for first-time buyers.
   • Applicable where the stamp duty value of the property does not exceed ₹45 lakh.
   • This aligns with the government’s vision of ‘housing for all’ and addresses the need for affordable housing.
2. HRA Deduction for Bengaluru
   • Expansion of the higher HRA exemption of 50% to include Bengaluru, acknowledging the city’s economic significance and rising rental costs.

Measures to Increase Tax Collections

1. Capital Gains Holding Period
   • Extension of the holding period for shares and equity-oriented mutual funds from 12 to 24 months for long-term capital asset classification.
   • This would result in a higher tax rate of 15% for transactions within 24 months.
2. Tax Collection at Source (TCS) on Jewellery
   • Introduction of TCS on high-value jewellery purchases, similar to TCS on high-value car purchases.
   • This measure aims to enhance transparency and ensure compliance, aiding in the detection of unreported income and curbing tax evasion.

Balancing Act

• The upcoming Budget is expected to balance taxpayer relief with measures to maintain fiscal discipline, addressing both individual financial security and broader economic goals.