Government should raise I-T exemption limit under new tax regime from ₹3 lakh to ₹5 lakh: EY

Budget 2024: Tax and consultancy firm EY, as quoted by Moneycontrol, said in a report on June 27 that the government should raise the basic exemption limit under the new tax regime from ₹3 lakh to ₹5 lakh to provide taxpayers with more disposable income.

The firm also suggested that the standard deduction should be doubled to ₹1 lakh under the new tax regime. Although income up to ₹7 lakh is exempt under the new tax regime, a 5 percent tax is levied on income over ₹3 lakh once this threshold is surpassed.

During their pre-budget consultations with the government, industry bodies also called for reducing the burden on taxpayers to stimulate consumption. Despite the economy growing by 8.2 percent in FY24, private final consumption expenditure remained subdued at 4 percent.

Experts suggest that maintaining such high economic growth rates is unsustainable without a corresponding increase in consumption.

“Enhance the extant tax-free LTCG ceiling on sale of equity shares/equity oriented mutual funds/units of a business trust from ₹1 lakh to ₹2 lakh,” the company said.

The agency also called for an extension of tax payment deferment for employee stock options at the time of sale to include all employers, not just eligible start-ups.

In the 2020 Budget, the government had extended this benefit to eligible start-ups, but its application remained limited.

Additionally, the firm requested clarity on TDS and the Systematic Lump Sum Withdrawal (SLW) facility under NPS.

“In terms of rationalisation measures, the complex structure of Tax Deducted at Source (TDS) rates across different categories of payments has created confusion and compliance burdens. Simplifying these rates by consolidating categories and creating a small "negative list" of non-liable payments for TDS could streamline processes and reduce disputes,” said Sameer Gupta, National Tax Leader, EY India.

For indirect taxes, EY recommended simplifying customs compliance procedures, introducing a one-time dispute resolution scheme under Customs and GST law, and extending RoDTEP benefits.