As India gets ready under the Modi 3.0 government for the Union Budget 2024, expectations are skyrocketing. Under the direction of Finance Minister Nirmala Sitharaman, there are great hopes for tax reliefs and policies meant to spur economic development.
This budget, which sets the tone for India’s economic path in the next years, has the weight of the first budget of the new administration.
Examining the New Tax Regime In Modi 3.0
Originally presented in the Union Budget 2020, the new tax system was intended to provide taxpayers with reduced rates but without the customary deductions.
It failed to be widely adopted despite its possible advantages, hence the government started to think about more changes. These included rebates up to ₹7 lakh yearly and a standard deduction to appeal to the incoming government.
Prospects Modifications in the New Tax System
Although the new tax system has reduced tax rates, taxpayers have not particularly found attraction in it. Several more deductions under this system could help to improve its appeal and promote more general adoption. One of the main expectations is the inclusion of Section 80C benefits into the new tax system, which is now solely accessible under the old one. As RSM India’s founder, Suresh Surana, emphasizes, this could encourage more taxpayers to choose the new system.
Section 80C Deduction Limitation
Section 80C of the Income-tax Act, 1961, under the former tax system, enables deductions for many kinds of savings and investments including LIC, PPF, RPF payments, and more.
Last changed in 2014 by Finance Minister Arun Jaitley during Modi 1.0, the present yearly ceiling for these deductions is ₹1,50,000. Nonetheless, given the variety of qualified investments, stakeholders are coming to the opinion that this restriction is limiting.
An increase in this deduction limit to ₹2 lakh per ann is much awaited in order to better fit the range of investment possibilities accessible. This change would provide taxpayers more freedom to profit from a wider range of savings and investment options.
Anticipated Edit Changes Under the Old Tax System
Although there is always potential for development, the previous tax system has helped consumers with several deductions under Section 80C. A rise to ₹2 lakh is expected because the present ceiling seems to be constrictive, which would fit the demands of the varied investing scene of today.
This move could help taxpayers maximize their investments and savings, therefore supporting more financial security and economic stability.
Tax Slabs Rationalized to Increase Consumption
Particularly with an eye toward lower-income groups, the forthcoming budget is also expected to bring changes to India’s income tax system. For earnings above ₹3 lakh, the income tax now begins at 5% and increases significantly to 30%.
This sharp rise has been noted as a barrier to the rise in disposable income, which influences GST collections and hence, economic activity.
Through rationalizing these tax bands, the government seeks to boost discretionary income for a larger spectrum of the population. This action might increase GST collections, encourage consumption, and raise economic activity. Officials believe that a more fair and strong economic climate depends on this kind of rationalizing.
Economic Plans and Pre-Budget Consultations
Following conversations with Revenue Secretary Sanjay Malhotra on June 18, Finance Minister Nirmala Sitharaman has started pre-budget engagements with industry groupings beginning June 20.
Aligning the budget with the needs and expectations of many stakeholders—including businesses, farmers, taxpayers, and the middle class—these conversations are absolutely essential.
While supporting coalition pledges, the Modi 3.0 government is also focused on balancing development acceleration with inflation control. Among India’s ambitious goals include reaching a “Developed India” by 2047 and a USD 5-trillion GDP.
Driven by rural demand and low inflation, the RBI projects a 7.2% GDP growth for the fiscal year.
Conclusion
The Union Budget 2024 promises to deliver notable improvements meant for tax relief and economic stimulus. The administration wants to make the new tax system more appealing and fair by fixing its flaws, streamlining tax slabs, and raising deduction limits.
All eyes are on the possible reforms that can define India’s economic destiny as Finance Minister Nirmala Sitharaman gets ready to unveil the budget.
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