An increase in the standard deduction could be made by the government.
In the Union Budget presentation every year, the announcement that everyone awaits is the income tax relief for individual taxpayers, mostly the salaried class. This year as the government will be presenting an Interim Budget ahead of the Lok Sabha elections, expectations are high on relief for the individual taxpayers.
Finance Minister Nirmala Sitharaman will be presenting the Interim Budget on February 1.
Unlike a full-fledged budget, in Interim Budget or Vote on Account, lucrative announcements may not be expected. Finance Minister Nirmala Sitharaman has already made it clear that the Budget is unlikely to have any “spectacular” announcements.
"It is a matter of truth that the February 1, 2024, budget that will be announced will just be a vote on account because we will be in an election mode. So, the budget that the government presents will just be to meet the expenditure of the government till a new government comes into play," Ms Sitharaman said at the CII Global Economic Policy Forum in December 2023.
While any changes to the tax slabs are very unlikely, the government could make announcements in line with its focus on ease of paying taxes. The government could introduce an e-verification process for tax returns and the filing of compliance forms, such as Form 67, according to experts.
To ensure implementation of the move, the government will have to tackle the various limitations in its way. For example, for e-verification, the taxpayer may require net banking/ demat facilities with selected banks, availability of digital signature and Aadhaar OTP.
For non-resident taxpayers, certain special provisions will have to be made to allow the e-verification process from abroad. The move could result in reduced paperwork and administrative tasks.
An announcement regarding tax payments from and refunds to the overseas bank accounts of the taxpayer is also expected in the Budget 2024. Presently, tax payments in India can be made through net banking, NEFT/RTGS, UPI, over-the-counter payment and other mediums.
However, this is limited to only Indian banks and this creates a problem for non-residents, particularly foreign nationals while claiming refunds in their income-tax returns after they close their bank account and leave India.
An increase in the standard deduction could be made by the government in the Budget this year.
The standard deduction is a fixed deduction for salaried classes without the need to produce any proof of any actual expense incurred. This provision was discontinued in 2005 but was reintroduced in 2018 with a deduction limit set at ₹40,000. It was increased to ₹50,000. Since then, there has been no further increase.
With the increased cost of living and inflation, this exemption limit is deemed insufficient. The government may address this concern by increasing the standard deduction limit to ₹100,000.