With Union Budget 2024 just a few days away, there is speculation over probable tax sops for the middle class. The third budget of the Modi government is likely to dole out major tax sops, especially by way of tinkering with the new tax regime.
New Tax Regime Enhancements
The government is considering an increase in the deduction limit and more deductions to make this regime more attractive. The existing regime already allows ₹50,000 as a deduction, which is considered less than adequate by many. Experts have been arguing for an increase in this limit to ₹500,000. In addition, the following revision of tax rates may be under the hood:
- Income up to ₹500,000: No tax
- Income from ₹500,000 to ₹1,000,000: 10%
- Income from ₹1,000,000 to ₹2,000,000: 20%
- Income above ₹2,000,000: 25%
Reliefs to the Middle Class Likely
As the government is already striving to curb unemployment and inflation, a reduction in taxation may offer substantial relief. There are also demands for the abolition of some of the surcharges and cess since it is the responsibility of the government to fund education and health services.
Rolling Back the Previous Deductions
Some of the deductions that the government might add to lure people to switch from the old regime to the new one are those concerning the House Rent Allowance and Section 80C rebates. This would help allay some of the apprehensions and create more confidence in the new regime for the taxpayer.
These changes also provide more massive relief and more incentives for adopting the new tax system and are, therefore, more beneficial to the taxpayer.
