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:
- 80D deduction limit—The deduction limit under Section 80D for medical insurance premiums should be increased from ₹25,000 to ₹50,000 for individuals and ₹50,000 to ₹75,000 for senior citizens, reflecting rising healthcare costs. Additionally, extending Section 80D benefits to the new tax regime would promote equitable access to healthcare.
- Ease TDS compliance for home buyers —Currently, 1% TDS is deducted on property purchases exceeding INR 50 lakh. While this process is straightforward for resident sellers (using Form 26QB), it becomes more complex for Non-Resident Indian (NRI) sellers.
- Simplification of capital gains taxation —The complexity of the current capital gains tax regime poses challenges for investors, with numerous factors to consider, such as asset classes, holding periods, tax rates, and residency status. The government should streamline the classification of equity and debt instruments, unify tax treatment for listed and unlisted securities, and simplify indexation provisions.
- Metro city status for Bengaluru —Bangalore to be considered a metro city for the purpose of HRA exemption- Despite being recognised as a metro city by the Indian Constitution, Bengaluru remains classified as a non-metro for income tax purposes, limiting HRA deductions to 40% for its residents instead of 50% available in other metro cities.
Goods & Services Tax:
- Streamlining Customs law —The focus of the Interim Budget 2024 is anticipated to concentrate on streamlining Customs law compliance rather than GST law, which is predominantly addressed in GST Council meetings. While the Central GST Act may undergo amendments to align with some of the GST Rules recently passed, expectations for Budget 2024 include significant aspects.
- Introduction of revised annual GST return form —Another expectation involves introducing a revised annual GST return form, allowing taxpayers to rectify errors in the GSTR-9 form, particularly for B2B transactions. This measure aims to prevent unnecessary scrutiny by tax officers due to errors in the originally filed returns.
- GST on reverse charge for non-compliant vendors —Additionally, we expect a new reverse charge-based mechanism for better GST compliance. Buyers who are large taxpayers with turnovers exceeding ₹100 crore or ₹500 crore could directly pay GST dues to the government instead of their small vendors. This shift in tax payment onus aims to alleviate the compliance burden on small businesses and facilitate smoother transactions for large enterprises dealing with smaller vendors.
The above proposals would ensure timely remittance of GST by large enterprises, enabling small businesses to file quarterly or half-yearly statements, reducing their monthly tax payment obligations. This change could also resolve challenges faced by large enterprises dealing with small vendors, as it shifts the responsibility of tax payment to buyers, facilitating smoother ITC claims and reducing administrative burdens associated with their following up with small vendors.
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