As the full budget for 2024-25 approaches, taxpayers are eagerly anticipating relief measures amid the rising cost of living.
In this episode of Invest Smart, Nitin Baijal, Executive Director at Deloitte India, shared insights on what taxpayers might realistically expect from the budget, scheduled for the third week of July.
Baijal noted that the government’s focus is likely to remain on the simplified tax regime introduced in previous years. To encourage more taxpayers to adopt this regime, he suggested that the government might increase the standard deduction from ₹50,000 to ₹1,00,000, or even higher for senior citizens, to account for escalating medical and living costs. Currently, only 15-20% of taxpayers have embraced the new regime, with most still preferring the old one due to available deductions under Chapter 6.
Baijal also emphasized the need for simplifying the income tax slabs. He proposed reducing the number of slabs from five to three, with rates of 10%, 20%, and 30%, which could make the tax system more accessible and encourage the transition to the new regime.
The flexibility to switch between tax regimes, especially for business professionals, was highlighted as a potential area for improvement. Currently, taxpayers can only change their regime once, which adds complexity. Baijal suggested allowing more frequent changes, possibly twice a year.
Given the inflation and rising costs over the past decade, an increase could provide much-needed relief, he noted.
He also discussed the possibility of aligning capital gains tax rates across asset classes to simplify the system. For instance, standardizing long-term capital gains tax and holding periods could reduce confusion and make compliance easier for taxpayers.
Additionally, Baijal touched on the potential reclassification of futures and options (F&O) income from business income to speculative income to discourage excessive speculative trading.
In conclusion, Nithin Baijal's top five budget expectations include simplifying the new tax regime, increasing the standard deduction, providing more support for senior citizens, aligning capital gains tax rates, and reclassifying F&O income.
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