New Delhi: Amid the slowdown in expenditure by common people on goods and services, the government may give some concessions on the tax front in the general budget to be presented for the financial year 2025.
The government’s emphasis is on bringing more and more people towards the new tax regime instead of the old tax regime. Therefore, while presenting the budget on July 23, Finance Minister Nirmala Sitharaman can take steps like increasing the standard deduction and increasing the tax exemption limit from Rs 3 lakh to Rs 5 lakh under the new tax system. Experts say that this will increase the attractiveness of the new tax system.
With GDP growth of 8.2% in FY24, it was the third consecutive year when the economy grew at a pace of more than 7%. However, the growth of Private Final Consumption Expenditure (PFCE), on which about 60% of the economy depends, was only 4%. Experts are insisting on giving incentives to increase it.
What are the experts saying?
Deloitte India Director Tarun Garg said, ‘The government can increase the standard deduction limit from Rs 50,000 to Rs 1 lakh in the new tax regime. Deductions under 80D on health insurance premium can be included in the new tax regime. Its limit should also be increased. This will also encourage people to take adequate health insurance cover.’
Tax expert and senior chartered accountant Sushil Agarwal said, ‘There is no possibility of relief in the old tax regime as the government wants to phase it out. In the new tax regime, the tax exemption limit can be increased from Rs 3 lakh to Rs 5 lakh. Currently, those with an annual income of up to Rs 7.50 lakh do not have tax liability, it can increase to Rs 9-10 lakh. There is a situation of double taxation on dividends. First the company pays tax on it and then the person receiving it pays tax. This should be abolished.’
What changes are possible regarding NPS?
Garg said, ‘The deduction limit for employer contribution in NPS is currently 10% of the basic salary. It can be increased to 14%. This will be similar to the benefits being given to central and state government employees. Also, more cities should be included in the category of metro cities for house rent allowance. This time the government can give metro city status to Bengaluru, Pune, Hyderabad and NCR for this purpose.’ Currently, HRA exemption of up to 50% of the basic salary is available on rented house in Delhi, Mumbai, Chennai and Kolkata. For other cities, the limit is 40%.
