Budget 2024: What common man should expect on income tax

With the Modi 3.0 government presenting its first Union Budget 2024-25 today, there is an anticipation of a revision in income tax slabs to provide relief to the middle class. The BJP's Lok Sabha Elections 2024 manifesto emphasised the need to enhance disposable income for the middle class to boost consumption and economic growth. The BJP-led government's Interim Budget 2024 had also hinted at rationalisation of the tax structure to make it more "taxpayer-friendly" and support economic activities.

Experts say the Modi government could, this time, increase the "basic exemption limit" and adjust income thresholds for various tax rates. "The deduction limit under Section 80C, last reviewed in 2014, is expected to be increased to account for inflation, offering more tax-saving opportunities for individuals. Additionally, we may see an upward revision in the standard deduction and changes in the capital gain structure. While it is unlikely that all these changes will occur simultaneously, the possibility of any one of them happening cannot be ruled out," equity research firm Fisdom Research says in its Budget 2024 expectation report.

Ratings agency CareEdge in its Budget 2024-25 report says the government could raise the deduction limit on health insurance premiums under Section 80D of the Income Tax Act. "In the past few years, the government has taken various measures including increased tax exemptions on housing loan interest, tax relief for transactions up to ₹2 crore, the PMAY 'Housing for All' scheme, implementing denotification scheme of SEZ and the SWAMIH scheme for stalled projects which have contributed towards demand growth. The sector now seeks a revival strategy for affordable housing, industry status, and additional tax incentives to further boost demand."

CareEdge says its key expectations from Budget 2024-25 include tax benefits, revision in tax slab rate and threshold limit, the raising of the standard deduction and the deduction for interest on home loans, and reduction in the long-term capital gain tax rate.

JP Morgan, in its Budget report, says the record RBI dividend worth ₹2.11 lakh crore and increased tax collections could prompt the government to announce "targetted" schemes for the welfare of people while sticking to the fiscal deficit path.

In the Interim Budget 2024-25 in February, the Centre did not provide any relief to the common man in terms of changes to the income tax slabs. Since the cut in the corporate income tax rate in September 2019, there has been a continuous demand to reduce personal income tax rates as well. However, the government decided not to touch the income tax issue in February 2024, except from withdrawing outstanding tax demand up to FY15 for amounts less than ₹10,000.

The government in the year 2023 budget had extended the benefit of the standard deduction to the new tax regime. The FM had also provided relief to those with income up to ₹5 lakh, exempting them from paying any income tax in both old and new tax regimes. For middle-class individuals, the FM had reduced the number of slabs to five and increased the tax exemption limit to ₹3 lakh.