Budget 2024 | Here’re the top expectations on the tax front — Income Tax and GST

While major announcements may hold off until after the 2024 general elections, the upcoming Interim Union Budget presents an opportunity to address lingering concerns and set the stage for future economic growth.

It is most likely that this Budget would prioritise fiscal discipline and avoid populist measures. However, there is optimism for potential relief in the realm of personal income tax, particularly in the New Tax Regime.

Before that let’s understand what happened in the Budget 2023 in this front:

First Budget in “Amrit Kaal”: This sets the tone for the next 25 years of India’s growth.
Economy on the right track: 7% growth estimated for FY23, highest among major economies.
Focus on key areas: Inclusive development, infrastructure, green growth, youth power and financial sector.
Major announcement on Income Tax:
(a) New tax regime becomes default, but old regime also available.
(b) No tax on income up to Rs 7.5 lakh in new regime (Rebate + Standard Deduction)
(c) Highest surcharge rate reduced from 37% to 25% in new regime.
(d) New income tax slabs: 0-3 lakh (nil), 3-6 lakh (5%), 6-9 lakh (10%), 9-12 lakh (15%), 12-15 lakh (20%), 15 lakh+ (30%).

Now here are some of our top expectations for 2024:

Income Tax:

Proposal for 80D Deduction Limit:

It is proposed that the deduction limit under Section 80D for medical insurance premiums should be revised, increasing it from ₹25,000 to ₹50,000 for individuals and from ₹50,000 to ₹75,000 for senior citizens. This adjustment aims to accommodate the escalating healthcare costs faced by individuals and seniors.

Furthermore, there is a suggestion to extend Section 80D benefits to the new tax regime, thereby fostering equitable access to healthcare for a broader segment of the population.

Simplify TDS Compliance for Home Buyers:

Presently, a 1% TDS is deducted on property purchases surpassing INR 50 lakh. While this procedure is uncomplicated for resident sellers employing Form 26QB, it presents additional complexities for Non-Resident Indian (NRI) sellers.

Streamlining Capital Gains Taxation:

The existing complexity of the capital gains tax regime presents challenges for investors, given the multitude of factors to consider, including asset classes, holding periods, tax rates, and residency status. It is recommended that the government streamline the classification of equity and debt instruments, bring about uniformity in tax treatment for listed and unlisted securities, and simplify indexation provisions to enhance clarity and ease of compliance.

Granting Metro City Status to Bengaluru:

It is proposed that Bengaluru should be officially designated as a metro city for the purpose of House Rent Allowance (HRA) exemption. Despite being acknowledged as a metro city in the Indian Constitution, Bengaluru is presently categorized as a non-metro for income tax purposes. This classification restricts HRA deductions to 40% for its residents, in contrast to the 50% available in other metro cities. The proposal aims to rectify this incongruity and provide equitable HRA benefits to the residents of Bengaluru.

Goods & Services Tax:

Emphasis on Streamlining Customs Law:

The Interim Budget 2024 is expected to prioritize the streamlining of Customs law compliance rather than significant amendments to the Goods and Services Tax (GST) law, as the latter is primarily addressed in GST Council meetings. While adjustments to the Central GST Act may be made to align with recent GST Rules, the primary focus of Budget 2024 is anticipated to revolve around enhancing Customs law procedures.

Anticipated Introduction of Revised Annual GST Return Form:

It is anticipated that there may be an introduction of a revised annual GST return form, providing taxpayers with the opportunity to rectify errors, particularly in B2B transactions, which may have been present in the original GSTR-9 form. This measure is designed to prevent undue scrutiny by tax officers triggered by errors in the initially filed returns, enhancing the accuracy and efficiency of the GST filing process.

Proposed Changes in GST on Reverse Charge for Non-Compliant Vendors:

There is an expectation of introducing a new reverse charge-based mechanism to enhance GST compliance. In this proposed mechanism, large taxpayers with turnovers exceeding ₹100 crore or ₹500 crore could directly settle GST dues with the government instead of relying on their small vendors. This shift in the responsibility of tax payment aims to alleviate the compliance burden on small businesses while fostering smoother transactions for large enterprises dealing with smaller vendors.

The proposed changes are designed to ensure the timely remittance of GST by large enterprises. This would enable small businesses to file quarterly or half-yearly statements, reducing their monthly tax payment obligations. Additionally, the shift in tax payment responsibility to buyers could address challenges faced by large enterprises dealing with small vendors. It facilitates smoother Input Tax Credit (ITC) claims and reduces administrative burdens associated with following up on tax payments from small vendors.

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Budget 2024 | Here’re the top expectations on the tax front — Income Tax and GST