Budget Expectations: Salaried class demands reduction in tax rates, hike in standard deduction
Vijay C Roy
Chandigarh, July 17
Expectations of stakeholders, especially salaried taxpayers, from the first budget of the Modi 3.0 government are immense given the current inflation level. They are hopeful that when Finance Minister Nirmala Sitharaman presents the Union Budget 2024 on July 23, there will be some relaxation for them in terms of taxes. The Tribune spoke to taxpayers to know their budget expectations.
Boost twin engines of growth
The budget must prioritise the twin engines of growth: rural India and the middle class. The government’s focus on providing incentives to these sectors is imperative for giving a push to the consumption which has shown signs of recovery but remains below its potential.
A government initiative in this year’s budget can potentially unlock significant economic value. “Adjusting the tax slabs, particularly expanding the 20% tax bracket for the middle-income range, could act as a catalyst for consumption. This will help increase the disposable income of the middle class as well, leading to growth in both spending and savings,” said Manish Kothari, Co-Founder and CEO, ZFunds.
The old tax regime offers a spate of tax deductions which include loan payments, insurance premium, tax saving investments such as provident fund, tuition fee and medical expenses. These deductions are substantial and bring the tax liability down for many who opt for it over the new tax regime where deductions are very few. One key expectation is the Section 80C deduction limit increase from the current Rs 1.5 lakhs to possibly Rs 2.0 lakh.
Increase HRA exemption
The salaried class putting on rented premises expects that the government should allow higher house rent allowance (HRA) exemption to offset rising rental costs. This would reduce taxable income and increase affordability for those living in rented accommodations.
More relief on home loans
Citizens are of the view that the government should increase the tax exemption limit on both the principal amount and interest paid on home loans.
They shared that amid substantial rise in property value over the last couple of years, the current Rs 2 lakh tax rebate on housing loan interest should be enhanced to a minimum of Rs 5 lakh. Such a step will boost demand for residential properties.
This scheme, expired in 2022, should be revived to incentivise first-time buyers of affordable homes across cities. This will once again invigorate demand in this segment.
Rectify ESOP regulations
The new age tech employees expect announcement on ESOPs (Employee Stock Ownership Plans). These are employee incentives that companies use to attract, reward, and retain talent.
“ESOPs also enable employees to become shareholders and benefit from the company’s growth. Most of the new generation companies give part of company stake as ESOPs to senior employees, who work as well as promoters, but end up losing 40% value vis-a-vis promoters who can enjoy long-term capital gains (LTCG) advantage on equity. This situation needs to be rectified to enable them to earn higher margins,” said Swati Saxena, Founder & CEO – 4Thoughts Finance, a wealth management firm.
