Interim Budget 2024 Expectations:

With the Lok Sabha elections looming in April-June 2024, all eyes are on the upcoming Interim Budget, scheduled for February 1st. However, this year, it's not a typical full-fledged budget. Instead, it's an Interim Budget or Vote on Account.

Will Finance Minister (FM) Nirmala Sitharaman announce any major relief for income taxpayers and salaried taxpayers? Will income tax slab rates for FY 2025 be revised both for the old and the new income tax regime? Will the new income tax regime be made more attractive for taxpayers? FM Sitharaman had made major changes in the new income tax regime, which is now the default tax regime, in last year’s Budget. The FM had also announced a record capital expenditure to boost the economy. Experts are of the view that this year too, the government will focus on infrastructure development, with a particular thrust on roadways and railways. Additionally, some tax incentives to make the new personal income tax regime are also being anticipated.

Interim Budget vs. Full Budget:

Firstly, let's understand the difference between Interim Budget vs. Full Budget. Unlike a full-fledged budget covering the entire fiscal year, an interim budget bridges the gap until a new government is formed. Think of it as a temporary financial plan focused on routine expenses and ongoing programs. This explains why major policy changes or tax reforms are usually off the table.

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.

Bengaluru to be considered a metro city for HRA exemption:

Despite being recognized 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 the 50% available in other metro cities.

GST:

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.

Paying 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 Rs.100 crore or Rs.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 proposal ensures timely remittance of GST by large enterprises, enabling small businesses to file quarterly or half-yearly statements, and 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 following up with small vendors.

Salaried class eyes extended relief in NPS and PPF income tax benefits:

As Budget 2024 approaches, the salaried class is anticipating announcements that could ease their tax burdens. Among the expectations are revisions to investment schemes such as the National Pension System (NPS) and the Public Provident Fund (PPF).

While the 2024 interim budget might not be a game-changer, it provides valuable insights into the country's financial health and future priorities. For businesses and individuals, understanding the budget's focus and direction can help in strategic planning and decision-making.

Remember, the interim budget is not the final act. The full-fledged budget for FY 2024-25 will be presented after the elections, reflecting the new government's vision and plans.

So, stay tuned for the next chapter in India's economic saga!