Budget 2024: Strategies for FM Nirmala Sitharaman to Enhance Appeal of the New Income Tax Regime

Budget 2024: Finance Minister Nirmala Sitharaman introduced a new tax regime in the Union Budget 2020-21, with specific conditions. The government aims to make this new tax structure more appealing to income taxpayers. Starting from April 1, 2023, the new income tax regime has become the default option, but citizens retain the choice to benefit from the old tax regime. In last year's Budget (2023), the finance minister reduced surcharges for higher income brackets and introduced a standard deduction. 

1) Raise the basic exemption limit

The current government is set to present an interim budget ahead of the upcoming general elections, and taxpayers are anticipating significant measures, especially related to the new tax regime.

With the Budget 2024, salaried individuals are optimistic about an increase in the basic exemption limit for both the new and old tax regimes. 

They are also hoping for an elevation in the standard deduction limit under both tax structures. Additionally, expectations include an extension of HRA exemption and health insurance premium deduction under the new regime.

2) National Pension Scheme (NPS)

We recommend increasing the NPS limit to ₹1,00,000/- for both tax regimes.

3) Deduction for Interest on Housing Loans

As per sources: salaried individuals who have home loans are hesitant to switch from the old to the new tax regime to avoid losing the home loan interest deduction allowed under the old regime. They anticipate measures to encourage the transition, including extending the deduction for interest on housing loans to the new tax regime. 

This extension would make the new tax regime more appealing, especially for middle-income taxpayers with housing loans. In Budget 2023 presented on February 1, 2023, Finance Minister Nirmala Sitharaman adjusted the slab rates for individuals opting for the new income tax regime:

- No tax on income up to ₹3 lakh

- 5% tax on income between ₹3-6 lakh

- 10% tax on income between ₹6-9 lakh

- 15% tax on income between ₹9-12 lakh

- 20% tax on income between ₹12-15 lakh

- 30% tax on income of ₹15 lakh and above.

Also Read: New NPS Rules Coming into Effect on February 1

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