Will Budget 2024 live up to the common man’s expectations?

There are a lot of expectations from the Union Budget, which will be presented on Tuesday, July 23, from both common people and personal finance experts.

But will the budget live up to the expectations? We will get to know this tomorrow.

Let us look at some of the key expectations of experts.

Revising the tax slabs

While the government has made some provisions in the form of tax rebates and standard deductions, the highest tax rate (30%) under the old tax regime is applicable on income above ₹10 lakh. With the growing inflation, experts are hoping for an increase in the minimum threshold for the highest tax rate from ₹10 lakh to ₹20 lakh.

And to make the new tax regime a little more attractive, the government can also look at reducing the top tax rate from 30% to 20%.

Increasing Section 80C exemption limit

Raise your hand if your income has doubled but the maximum amount you can invest under Section 80C to reduce the taxable income is still the same. For most of us, the only thing that hasn’t changed is the ₹1.5 lakh limit.

After all, it was last revised in the Budget of 2014.

Moreover, all the investment options are clubbed together. It includes the National Pension System (NPS), Equity Linked Savings Scheme (ELSS), premium paid against life insurance, PPF, tax-saving FDs, National Saving Certificate (NSC), Sukanya Samirddhi Yojana and also the contribution made against the Employee Provident Fund (EPF).

So is it still an attractive option and does it amount to any significant reduction to the taxable income? Not really.

Hence, there is a big need for the government to consider increasing the limit for Section 80C to at least ₹2.5 lakh. Moreover, segregating EPF contributions from other investment options can bring a little more relief to taxpayers.

Separating life insurance premiums can also help individuals save on taxes and opt for a higher life cover.

Separating children’s tuition fees from Section 80C

Currently, the deduction on children’s tuition fees is also included under Section 80C. If you are a new parent and your children have started school, you might know the high tuition fees.

Most parents are now spending more money on their children’s education. Hence, there is a genuine need to separate children’s tuition fees from Section 80C to reduce the financial load on parents. Also, this move can help more parents invest a higher monthly amount towards their children’s higher education.

National Pension System (NPS) adjustments

Due to the recent changes made by the regulator, the NPS has emerged as a highly appealing retirement investment option. However, as retirement planning is a big financial requirement, more tax-friendly initiatives can increase the allure of NPS as a retirement investment option and encourage common people to focus on their retirement rather than leaving their retirement plans to destiny and their children.

Experts are hoping for an increase in the additional deduction limit under Section 80CCD(1B) from ₹50,000 to ₹1 lakh. Also, experts are looking forward to an increase in the tax-free withdrawal limit upon maturity from the current 60%.

Medical insurance premium deduction limit

Did you know that the medical inflation in India is 14%, the highest in Asia? However, the tax deduction you can claim under Section 80D towards the premium paid is ₹25,000. This health insurance plan covers yourself, your spouse and children. The limit is ₹50,000 for senior citizens. This limit also includes a ₹5,000 deduction for preventive health check-ups.

This was again last updated nine years back.

And we all know that in the last nine years, the health insurance premiums have gone up and so have the health care costs. Hence, there is an expectation that the limit will be increased to ₹50,000 for individuals below 60 years and ₹1 lakh for senior citizens.

This will not only help in saving tax but also nudge individuals to increase their insurance coverage. Other experts feel that if there is no increase in the deduction, the government should at least look at reducing the GST from the current 18% to 5% or do away with the GST. This can lighten the burden on taxpayers.