Budget 2024: Salaried Class Seek Tax Reforms, HRA Relief, and EV Incentives

Payrollers are anticipating the release of the FY25 Budget by Finance Minister Nirmala Sitharaman with great anticipation, as they hope significant tax reforms will alleviate financial burdens. According to a Deloitte report, the salaried class is advocating for a reorganization of tax slabs, incentives for purchasing electric vehicles (EVs), adjustments to housing rent allowance (HRA) rates, and a greater emphasis on affordable housing.

Calls for Tax Regime Parity

The recently introduced personal tax system underwent revisions with the introduction of the Budget 2023. Specifically, the basic exemption threshold was raised from Rs 2.5 lakh to Rs 3 lakh, while the surcharge on revenues beyond Rs 5 crore was reduced from 37% to 25%. These changes were an attempt to make the new tax structure more enticing. However, the old tax system remained unchanged, which prompted calls for an improvement to the slab structure. Experts from Deloitte predict that under the new tax system, the government may choose to increase the present income tax exemption limit of Rs 3 lakh to Rs 5 lakh.

Taking Another Look at HRA Deductions

Since it becomes the default choice, it would be beneficial to extend the benefits of the new tax regime to the old tax system for employees who prefer HRA exemptions and 80C deductions. Raising the standard deduction from the current Rs 50,000 would help more people. In key cities like Bengaluru, Hyderabad, Pune, and Gurugram, the leasing market has grown significantly due to the reopening of offices and the adoption of hybrid work techniques. In 2023, the market grew by over 30% year over year. This rise highlights the significance of looking into HRA deductions. Currently, HRA accounts for 20–30% of an employee’s total pay. Deloitte claims that changing the exception to allow more regions to get 50% of the base salary would provide desperately needed

Encourage the Use of EVs
To reduce carbon emissions, the government has been promoting EVs through a variety of initiatives including financial incentives. Since the objective is for EV sales to represent 30% of all vehicle sales by 2030, incentives such as those provided under the FAME II plan are crucial. Section 80EEB of the Income Tax Act, which was enacted in 2019, allowed interest paid on electric vehicle (EV) loans to be deducted up to Rs 1.5 lakh annually; however, this deduction was not allowed to continue past March 2023. Extending the deduction and raising it to Rs 2 lakh annually would significantly encourage the usage of electric vehicles.

Elimination of Home Loans for Accessible Housing

In keeping with the government’s goal of “housing for all,” the return of section 80EEA which allowed for a deduction for interest paid on house loans for affordable housing Is much anticipated. This section was beneficial to first time homeowners and was not extended past March 2022. As the FY25 Budget approaches, the salaried class is hopeful that these recommended changes would be taken into account to reduce their financial responsibilities.

Taking Care of HRA Exemption Differences

The focus of the Budget 2024 negotiations is on requests for significant tax reduction. The idea to expand the number of non-metropolitan municipalities exempt from the HRA in light of their growing economic and demographic significance is one of the primary causes for concern. Bengaluru now falls among the 40% of cities that are exempt from HRA, whereas the only cities that are eligible for a 50% exemption are Delhi, Mumbai, Kolkata, and Chennai. Due to their significant growth, experts argue that cities like Ahmedabad, Surat, and Kanpur should also be considered metros. Residents in these rapidly expanding areas sometimes pay higher rents and receive less tax benefits than those in urban centers. Experts suggest the government to reevaluate its rent exemption policy in order to reduce the financial burden on taxpayers.

Leave a Reply

Your email address will not be published. Required fields are marked *