Union Finance Minister Nirmala Sitharaman is set to present the Budget for the financial year 2024-25 in the Lok Sabha on July 23. As the date approaches, various sectors have high expectations. The focus is on potential tax reforms that could impact both individuals and businesses.
Key anticipated changes include an increase in the basic exemption limit and the standard deduction limit. There is also speculation about rationalising income tax rates and revising income tax slabs to boost disposable income and stimulate consumer spending. However, significant changes to the old tax regime are unlikely.
The government might simplify the tax structure and enhance compliance with measures like reduced corporate tax rates for SMEs, incentives for skill development, and investments in digital infrastructure.
Industrial analysts predict that while major overhauls in the tax structure may not be imminent, there will be announcements aimed at improving the Ease of Doing Business, consolidating the tax system for stability, and progressing towards the implementation of the Direct Tax Code. They expect the Direct Tax Code to simplify the tax structure and alleviate the tax burden, similar to the GST’s impact on indirect taxation.
There are calls for enhancing the slab limits in the new tax regime to alleviate tax liabilities for the middle class. Raising the rebate limit in the 2024 budget is seen as a strategic move to encourage taxpayers to transition to the new regime.
Analysts predict minimal changes to ongoing tax rates but suggest potential increases for gains from property transactions, delivery of shares, and F&O trading to curb property speculation and stock market volatility. There is also speculation about raising basic slab rates or standard deduction limits in response to prevailing food inflation and the need for a tax-neutral regime for LLP mergers and demergers.
Simplifying taxation by introducing a unified tax regime without exceptions is another key expectation. Analysts propose exploring alternative methods to incentivize home loans and National Pension System (NPS) investments. They suggest a streamlined process for integrating tax benefits with EMI or NPS payments, facilitating automatic linkage to tax returns. A unified tax platform could simplify tax filing for salaried taxpayers, making the process as easy as routine bill payments.
There are calls for increasing the tax rebate on home loan interest under Section 24 of the Income Tax Act from ₹2 lakh to ₹5 lakh. This move could stimulate demand for budget homes amidst post-pandemic sales declines.
Analysts anticipate reduced corporate tax rates for SMEs to bolster investment. They also expect a simplified GST structure with fewer tax slabs and lower rates on essential goods and services, aimed at enhancing compliance and reducing the overall tax burden on businesses.
These perspectives highlight the diverse expectations and calls for reform within India’s tax regime as stakeholders await the Union Budget 2024 announcement.
Disclaimer: The views and recommendations made above are those of individual analysts and not of Business Upturn.
