Budget 2024 Expectations Highlights: Tax slabs, new tax regime, jobs, infra capex in focus

Ministry of Finance has said in its review of the Indian economy that the government is building a road network and expanding rail and air networks at a record pace. India built 74 airports in the first 67 years after independence. It doubled that number in the last nine years. Whether the total length of highways, freight corridors, number of airports, metro rail networks or the trans-sea link, the ramp-up of physical and digital infrastructure in the last ten years is real, tangible and transformative.

Deepashree Shetty, Partner, Tax & Regulatory services, BDO India recommends the following:

1. Increase in standard deduction from salary income: Standard deduction of INR 50,000, as the case maybe, was introduced in lieu of the exemption of transport allowance and reimbursement of miscellaneous medical expenses. The same has now been allowed under new tax regime. Considering the inflation, we can expect raise in the amount of standard deduction that can benefit salaried individuals in the higher slabs.

2. HRA to include – Bangalore and Hyderabad under 50% limit cities considering their current cost of living: HRA is given by employer to cover the cost of living in a rented accommodation. For the purpose of exemption (or is it deduction), a higher limit of 50% of basic salary and dearness allowance (one of the conditions) is available for those living in metro cities i.e. Chennai, Delhi, Kolkata and Mumbai. As the cost of living and rental expenses in Bengaluru and Hyderabad are at par or more as compared to the specified metro cities, the benefit of higher deduction limit of 50% should be extended.

3. Extension of 80D limit to New Tax Regime: Deduction under section 80D of the Act regarding repayment of premium relating to medical and health insurance policies is currently available only for individuals opting for old tax regime. This should be extended under new tax regime too as medical expenditure is a basic necessity/expense for individuals.

4. Deduction for education loan: Section 80E deduction: which is currently available only under old tax regime, should be available under new tax regime too. This could help promote Government-backed schemes such as Atmanirbhar Scheme, Startup India Scheme, Skill development schemes etc. and enhance entrepreneurial skill development of the youth taxpayers.

5. Electricity and electronic gadget related exemption or deduction – under digital India program: As per the shift of work culture into hybrid model, dependency of individuals over digital gadgets and internet is high. However, there has been no consideration to provide any exemption/deduction for them. Hence, it is expected introduction of some tax benefit for such expenses.

In the Budget 2024 week, BSE Sensex on Tuesday ended the day in red after a positive start. The 30-share benchmark index closed the day at 71,139.90, down over 800 points or 1.11%. Nifty50 closed the day at 21,522.10, down over 200 points or 0.99%.

According to Gaurav Dua, Head - Capital Market Strategy, Sharekhan by BNP Paribas, “Year 2024 could be a year of consolidation for Indian equity markets. Nifty could move in a range with upward basis while global uncertainties would keep volatility high in broader markets. Hence, as part of portfolio strategy, it would be prudent to take some profits off the table especially from micro/smallcap space. On the other hand, there is a strong case for increasing exposure towards large-cap companies. Having said this, we do expect stock specific opportunities in the broader market. From a sectorial perspective, we could see revival in the IT services and Pharma sector. But we retain medium term preference for banking, engineering, real estate & ancillaries and select consumer stocks to play the multi-year upcycle in the Indian economy.”

Budget 2024: Floor leaders of various parties on Tuesday attended an all-party meeting convened by the government ahead of the Budget session of Parliament. Defence Minister and Deputy Leader in the Lok Sabha, Rajnath Singh, Parliamentary Affairs Minister Pralhad Joshi and his deputy Arjun Ram Meghwal represented the government at the meet.NCP chief Sharad Pawar, Congress' K Suresh, TMC's Sudip Bandopadhyay, DMK's T R Baalu, Shiv Sena's Rahul Shewale, Samajwadi Party's S T Hasan, JD(U)'s Ram Nath Thakur and TDP's Jayadev Galla were among the leaders present at the meeting at the Parliament House complex.It is a customary practice ahead of every session to convene a meeting as leaders of different parties highlight the issues they want to raise in Parliament, and the government offers them a glimpse into its agenda and seeks their cooperation.It will be a short session this time, between January 31 and February 9, with Finance Minister Nirmala Sitharaman set to table an interim budget ahead of the Lok Sabha polls. The new government will present the full-fledged budget.The session will begin with President Droupadi Murmu's address.

Budget 2024 income tax expectations: Section 80C is not included as a deduction under the new income tax regime and tax experts are divided on whether the government will look to include it eventually or not. While some believe that it is important to add Section 80C under the new tax regime to incentivise savings and also push more people towards the new regime, others are of the view that the government has introduced the new income tax regime with the objective of doing away with exemptions and deductions and hence simplify the income tax return filing process.

“Ten years ago, India was the 10th largest economy in the world, with a GDP of USD 1.9 trillion at current market prices. Today, it is the 5th largest with a GDP of USD 3.7 trillion (est. FY24), despite the pandemic and despite inheriting an economy with macro imbalances and a broken financial sector. This ten-year journey is marked by several reforms, both substantive and incremental, which have significantly contributed to the country’s economic progress. These reforms have also delivered an economic resilience that the country will need to deal with unanticipated global shocks in the future. In the next three years, India is expected to become the third-largest economy in the world, with a GDP of USD 5 trillion. The government has, however, set a higher goal of becoming a ‘developed country’ by 2047,” notes the Ministry of Finance in its review of the Indian economy released on Monday.

“Last year’s budget paved a path to higher adoption of EVs in India resulting in a sharp shift of customer mental models to make more greener & smarter choices. With the rise of marketplaces and digitisation in India, it is becoming a convenience first nation that is also setting high benchmarks globally. This year as a public listed company, we at Zoomcar anticipate the Union Budget 2024 to pave the way for innovative policies that accelerate sustainable mobility solutions and drive economic resilience which will help customers with cost effective solutions and mobility apps to support the evolution of transportation in the automobile industry,” says Greg Moran, CEO and Co-Founder Zoomcar.

Budget session: The government has called a meeting of floor leaders of different parties in Parliament on Tuesday ahead of the Budget session. It is a customary practice ahead of every session as leaders of different parties highlight the issues they want to raise in Parliament, and the government offers them a glimpse into its agenda and seeks their cooperation. It will be a short session this time, between January 31 and February 9, with Finance Minister Nirmala Sitharaman set to table an interim budget ahead of the Lok Sabha polls. The new government will present the full-fledged budget. The session will begin with President Droupadi Murmu's address.

Budget 2024 income tax expectations: Many tax experts are of the view that the government should look to raise the standard deduction from the current Rs 50,000 to Rs 1 lakh in both the old and the new income tax regime. This is in line with inflation and will give more disposable income in the hands of people, they say. Standard deduction was reintroduced in 2018 at Rs 40,000 and hiked to Rs 50,000 in the 2019 Budget.

The Ministry of Finance has said in its review of the Indian economy has said that the government is building a road network and expanding rail and air networks at a record pace. India built 74 airports in the first 67 years after independence. It doubled that number in the last nine years.

Stock market today: BSE Sensex and Nifty50, the Indian benchmark equity indices, continued their upward trend on Tuesday. BSE Sensex opened the day at the 72,000 mark, while Nifty50 was above 21,700. At 9:22 AM, BSE Sensex was trading at 71,992.95, up over 50 points to 0.071%. Nifty50 was at 21,762.15, up over 20 points or 0.11%.

“Indian economy has undergone many structural reforms that have strengthened its macroeconomic fundamentals. These reforms have led to India emerging as the fastest-growing economy among G20 economies. In 2023-24, as per current estimates, it is estimated to have grown 7.3 per cent on top of the 9.1 per cent (FY22) and 7.2 per cent (FY23) in the previous two years, and the economy is generating jobs,” Ministry of Finance has said in its review of the Indian economy released on Monday.

Ministry of Finance has said in its review of the Indian economy that the Indian economy has created jobs; the unemployment rate has declined considerably from the peaks during Covid times. The labour force participation rate has increased, especially that of women. Net new subscribers to the Employee Provident Fund (EPF) have steadily risen postCovid, especially among the younger population.

“The Indian economy is better placed than ever to take on challenges because of the policies adopted and implemented in the last decade. The Union government has built infrastructure at a historically unprecedented rate, and it has taken the overall public sector capital investment from Rs 5.6 lakh crore in FY15 to Rs 18.6 lakh crore in FY24, as per budget estimates. That is a rise of 3.3X,” the Ministry of Finance has said in its review of the Indian economy released yesterday.

FM Nirmala Sitharaman made extensive changes to the new personal income tax regime in last year’s Budget. The new income tax regime has also been made the default income tax regime for salaried taxpayers. This indicates that the government is looking to eventually phase out the old tax regime that offers more tax exemptions and deductions. Tax experts are of the view that since standard deduction was introduced in the new income tax regime last year, there is a likelihood that the government may either increase the standard deduction limit in the new tax regime or add more exemptions and deductions such as those for Section 80C, 80D and housing loan interest.

“The global economy is struggling to maintain its recovery post-Covid because successive shocks have buffeted it. Some of them, such as supply chain disruptions, have returned in 2024. If they persist, they will impact trade flows, transportation costs, economic output and inflation worldwide. India will not be exempt from it, but having faced and seen off COVID and the energy and commodity price shocks of 2022, India is quietly confident of weathering the emerging disturbances,” the Ministry of Finance has said in its review of the Indian economy released yesterday.