Budget 2024: What common man expects on personal income tax front

Budget 2024 is all set to be announced on 23rd July, 2024. India is looking for a crucial roadmap for “Viksit Bharat” by 2047 and provide short and long-term plans for the next 5 years under the government’s 3.0 administration. Having said that, let us see what the common man expects from the Budget 2024.

Tax rates

With effect from FY 2023-24, the government introduced standard deduction to increase the adoption of the new regime as against the old regime. Hence, now the new tax regime has become the default tax regime.

To ensure that maximum individuals opt for the new regime, it is recommended that the government provides for the following under the new tax regime –

-Reduce the maximum tax rate from 30% to 25%.

-Increase the standard deduction from INR 50,000 to INR 100,000.

Considering other cities as metros for the purpose of HRA deduction

-Post pandemic there has been an increase in the cost of rented accommodation across Tier 1 and Tier 2 cities. The Income Tax provisions consider only four cities in India (Delhi, Mumbai, Chennai, and Kolkata) to be metro cities and while calculating the HRA exemption and one of the criteria is 50% of the basic salary as against 40% of basic salary for non-metro cities (other cities).

-The government should notify other cities for the above purpose as metro cities, such as Bengaluru, Pune, Hyderabad, Ahmedabad, Gurgaon, etc.

Providing perquisite valuation for electric vehicles provided by employer to employees

-Rule 3 provides concessional valuation rules where company car is provided by an employer to an employee depending on the cubic capacity of the engine. However, there is no specific provision for electric vehicles.

-Given the encouragement to use electric vehicles, Rule 3 could be suitably amended to bring in the valuation mechanism for electric vehicles.

-This valuation mechanism would help bring in much required clarity.

Parity in deduction allowed for contribution to National Pension Scheme

Currently, an individual being an employee, is allowed deduction of the whole of the contribution made during the financial year into the National Pension Scheme which does not exceed:

-14% of salary where such contribution is made by central or state government employees.

-10% of salary in case of other employees

This creates disparity between the government and private sector employees. Hence, it is suggested that private sector employees also be allowed deduction of 14% of the contribution into National Pension Scheme, in line with government sector employees.

Simplifying compliance procedures for non-resident

-Where an individual pays rent or consideration for buying of property from an NRI landlord/seller of the property, the individual tenant/buyer is required to obtain TAN. He is also required to deposit the tax, file e-TDS returns and issue Form 16A. Hence, it is recommended to simplify the process by introducing challan–cum–statement just as it is in the case of residents.

-Enabling tax payments from overseas bank accounts

-Refund claim to be credited to overseas bank account where foreign nationals have closed Indian bank account.

-E-verification using OTPs to foreign mobile numbers or having two-factor authentication (different OTPs for foreign mobile numbers and email addresses).

These are some of the expectations on the personal tax front from the Union Budget 2024.

Article for publication authored by Homi Mistry, Partner with Deloitte India. With inputs from Niji Arora, Director, Tarika Agarwal, Manager with Deloitte Haskins & Sells LLP.