The Finance Minister, Nirmala Sitharaman, unveiled a fresh tax framework in the Union Budget 2020-21, accompanied by specific conditions. The government aims to render the new tax structure appealing to income taxpayers.
As of April 1, 2023, the new income tax framework has been designated as the default tax system. Nevertheless, citizens retain the choice to embrace the advantages of the previous tax structure.
In the preceding year’s Budget for 2023, the finance minister decreased the surcharge for the higher income bracket and also authorized a standard deduction. It is projected that, as a result of these initiatives, a minimum of 40% of taxpayers are expected to adopt the new tax regime.
Tax Deduction for Interest on House Loans
Salaried individuals who have home loans are hesitant to transition from the old to the new tax regime to avoid losing the home loan interest deduction permitted under the old regime. They anticipate measures to be implemented to incentivize the shift to the new tax regime.
To enhance its appeal, the finance minister could contemplate extending the deduction for interest on housing loans to the new tax regime. Tax experts mentioned that most middle-income taxpayers have housing loans and would find the new tax regime more attractive if this benefit was included.
Suggest the Limit of NPS
Experts recommend surging the limit of NPS to ₹1,00,000/- for both tax regimes
Rise in the Basic Limit of Tax Exemption
The present government is set to unveil its interim budget in anticipation of the upcoming elections. Taxpayers are anticipating significant measures in this budget, especially in light of the new tax regime.
In the context of the union budget 2024, salaried individuals are optimistic about a rise in the basic exemption limit for both the new and old tax regimes.
Additionally, they are hopeful for an increase in the standard deduction limit under both tax regimes. Expectations also include improvements in HRA exemption and health insurance premium deductions under the new regime.
During the presentation of Budget 2023 on February 1, 2023, Finance Minister Nirmala Sitharaman adjusted the slab rates for individuals choosing the new income tax regime.
- No tax would be levied for income up to INR 3 lakh
- Income between INR 3-6 lakh would be taxed at 5 per cent
- Income between INR 6-9 lakh would be taxed at 10 per cent
- Income between INR 9-12 lakh at 15 per cent
- Income between INR 12-15 lakh at 20 per cent
- Income of INR 15 lakh and above will be taxed at 30 per cent.
