Budget 2024: Expectations for Interim Budget 2024 include a potential Rs 50,000 Hike in Tax Exemption Limits by Government

In a move to benefit taxpayers, the Modi government is considering minor adjustments to the new tax regime in Budget 2024. There's a proposal to raise the existing tax exemption from the current Rs 7 lakh to Rs 7.5 lakh. 

With parliamentary elections on the horizon, the government aims to appeal to taxpayers, providing potential relief in the form of higher limits for those under the new tax regime. 

The forthcoming interim budget on February 1, 2024, may witness an increase in the tax exemption limit, with the government potentially introducing a new finance bill for this adjustment.

What changes can we expect in the new budget?

The government is considering minor adjustments to the new tax regime in Budget 2024, aiming to make it more favorable for taxpayers.

One key proposal involves an increase in the existing tax exemption. Currently set at Rs 7 lakh in the new tax regime, there's deliberation to raise it to Rs 7.50 lakh, providing an additional discount of Rs 50,000.

Previously, the government had elevated the exemption limit from Rs 5 lakh to Rs 7 lakh, accompanied by an increase in the rebate under section 87(A) from Rs 12,500 to Rs 25,000.

In addition to the tax exemption on income up to Rs 7 lakh, taxpayers could potentially receive an extra exemption of Rs 50,000.

Income Tax-Free Up to Rs 8 Lakh?

In the upcoming financial year, salaries up to Rs 8 lakh might be tax-free, according to tax experts.

Currently, the existing tax exemption on income is up to Rs 7.50 lakh, inclusive of basic exemption, rebate, and standard deduction.

Recent Changes:

In the 2023-24 Union Budget, Finance Minister Nirmala Sitharaman introduced alterations to the new tax regime. The basic exemption limit was raised from Rs 2.5 lakh to Rs 3 lakh and the rebate limit up to Rs 5 lakh was extended to Rs 7 lakh. Additionally, a standard deduction of Rs 50,000 was incorporated, making income up to Rs 7.5 lakh tax-free.

Further Changes Expected:

Experts anticipate swift changes in the new tax regime, especially with the surge in income tax returns, signaling an opportunity for the government to enhance its appeal. With a record 8.18 crore Income Tax Returns filed by December 31 for the assessment year 2023-24, the government may consider introducing additional tax exemptions to attract more taxpayers.

Balancing Act:

While experts suggest increasing tax exemptions for the benefit of taxpayers, the government is focusing on enhancing tax collection. The total advance tax collection for the financial year 2023-24, till December 15, showed a robust 19.76% increase compared to the previous year. The current tax collection stands at Rs 6,24,329 crore, marking a significant growth from Rs 5,21,302 crore a year ago.

Positive Trends:

Direct tax collection has also seen a substantial rise of 20.66% till December 17, 2023, with collections amounting to Rs 13,70,388 crore, compared to Rs 11,35,754 crore during the same period last year.

Also Read: Polycab Provides Clarification, States No Communication Received from Income Tax Regarding Tax Searches

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