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Announcements of tweaks, if any, in the forthcoming interim budget will also be no less of an exciting event. Indians every year keep hopes high of more exemptions and avenues to cut down on paying the income taxes, while the government has added a new regime and is keen to move to an exemption-less income tax system.
The income tax department has reported a 20.66% surge in net direct tax collections in this fiscal year till mid-December, reaching over Rs 13.70 lakh crore. These collections encompass Corporation Tax at Rs 6.95 lakh crore and Personal Income Tax (including Securities Transaction Tax) at Rs 6.73 lakh crore. These figures signify 75% of the budget estimates for direct tax collections in this fiscal year.
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Income tax announcements in the forthcoming interim budget will be of more signifcance as the world’s largest democracy goes to polls where Narendra Modi is seeking to return to power as the prime minister for a third term. Finance Minister Nirmala Sitharaman is set to unveil the Interim Budget on February 1. The full Budget for fiscal year 2025 is anticipated post the formation of the new government. Tax experts seek Budget 2024 to elevate Section 80D medical insurance premium deductions from ₹25,000 to ₹50,000 for individuals, ₹50,000 to ₹75,000 for seniors. They are also vouching for a streamlined capital gains tax regime and increased interest repayment deductions for home loans on primary residences or business properties, according to media reports.
Now, let’s take a look at recent income tax announcements from Budget:
Budget 2023:
The Budget proposed to make new income tax regime the default option. Basic exemption limit was hiked up to Rs 3 lakh from Rs 2.5 lakh under the new income tax regime. Income tax slabs in new tax regime was changed as well.
A rebate under section 87A was increased under the new tax regime from current income level of Rs 5 lakh to Rs 7 lakh. Thus, individuals opting for new income tax regime having income upto Rs 7 lakh will not pay any taxes.
Budget 2023 also tweaked the tax slabs under the new income tax regime. There is no tax for income of up to Rs 3 lakh. Income above Rs 3 lakh and up to Rs 5 lakh, will be taxed at 5 per cent. For income of above Rs 6 lakh and up to Rs 9 lakh, the income tax is applicable at a 10 per cent rate. For income of more than Rs 12 lakh and up to Rs 15 lakh, income is taxed at a 20 per cent rate. For those who have a taxable income of above Rs 15 lakh, a 30 per cent income tax rate is applicable.
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Budget 2022:
In Budget 2022 speech, the shortest one, FM Nirmala Sitharaman left commoners and the middle class wanting more. Disappointingly, there were no alterations in personal income tax slabs or rates. As a result, individual taxpayers had to pay taxes according to the existing tax rates based on their chosen tax regime for FY 2022-23, beginning April 1, 2022.
Budget 2021:
Contrary to high expectations, Budget 2021 had failed to offer any income tax relief to taxpayers. There were no adjustments in income tax slabs or rates, and no new tax exemptions or deductions were introduced. Additionally, the standard deduction for salaried individuals and pensioners remained unchanged.
Without alterations in the basic exemption limit, income tax slabs, or rates, individual taxpayers had to persist in paying taxes at the same rates as those applicable in FY 2020-21.
Budget 2020:
The Union Budget 2020 proposed a new tax structure that slashed income tax rates and reshuffled the income tax slabs, aiming to reduce the total tax burden on individuals. In the new tax regime, 70 tax exemptions were planned for removal. Under these adjustments, income between Rs 5 lakh and Rs 7.5 lakh was to be taxed at 10%, down from the prevailing 20%. Income between Rs 7.5 lakh and Rs 10 lakh would have been taxed at 15%, reduced from the current 20%, while income between Rs 10 lakh and Rs 12.5 lakh was proposed to be taxed at 20%, down from the current 30%. For incomes between Rs 12.5 lakh and Rs 15 lakh, the rate was intended to be 25%, down from 30%, and incomes above Rs 15 lakh would continue to be taxed at 30%.
The budget in 2020 provided taxpayers with the option to choose between the existing income tax regime, enabling the utilization of existing income tax exemptions and deductions, and a new tax regime with lowered income tax rates and revised income tax slabs, albeit without tax exemptions and deductions.
Budget FAQs
When will the Interim Budget be announced?
The Interim Budget is set to be announced on February 1.
What are some expectations from Budget 2024 in terms of tax deductions?
Tax experts are expecting Budget 2024 to hike Section 80D medical insurance premium deductions and increase interest repayment deductions for home loans.
What changes were proposed in the income tax regime in Budget 2023?
In Budget 2023, the new income tax regime became the default option, the basic exemption limit was increased, and the tax slabs were changed.
