Union Finance Minister Nirmala Sitharaman is set to unveil the Interim Budget 2024 on Feb 1, characterised by a lack of significant policy announcements, given the impending Lok Sabha elections scheduled this year.
The comprehensive Budget will be reserved for presentation post the formation of the new government following the general elections. Typically, interim budgets encompass projections for expenditure, revenue, fiscal deficit, financial performance, and insights into the upcoming financial year for the current government, albeit without the introduction of any substantial policy changes.
Tax Slab Revisions
There are seven slabs in which the assessee is taxable, which are quite confusing for a layman to understand. There should be an easier and simpler way to tax individuals. One of the most eagerly awaited aspects of any budget is the revision of income tax slabs. In recent years, taxpayers have voiced concerns about the existing slabs and the need for adjustments to account for inflation and rising living costs. As we approach the 2024 budget, speculation is rife about possible changes to the tax slabs to provide relief to the common taxpayer.
A possible scenario could involve an increase in the basic exemption limit, thereby reducing the tax burden on individuals with lower incomes. Additionally, the government may consider introducing new slabs to ensure a more progressive tax structure, aligning with the evolving economic landscape.
Digital Transformation and Tax Compliance
The digitisation of financial systems has been an ongoing theme, and the 2024 budget is expected to emphasise the government’s commitment to enhancing digital infrastructure. From an income tax perspective, this could mean an increased focus on leveraging technology for tax compliance and administration.
Anticipated reforms may include the introduction of advanced data analytics and artificial intelligence tools to streamline the tax assessment process. This would not only improve efficiency but also contribute to reducing tax evasion and ensuring a fair and transparent tax system.
Incentives for Sustainable Practices
With growing global concerns about climate change and environmental sustainability, the 2024 budget might introduce incentives for individuals and businesses to adopt eco-friendly practices. Tax benefits for investments in renewable energy, energy-efficient technologies, and sustainable business practices could be on the horizon. Unlike last year when there were no additional benefits provided for Green Energy, this year there is hope that new tax benefits will be provided by the government for renewable energy to boost this sector.
This aligns with the government’s broader agenda to promote a green economy and could serve as a catalyst for positive change in both environmental and economic domains.
Focus on Startups and Innovation
India’s startup ecosystem has been thriving, and the government has consistently shown support for entrepreneurship and innovation. In the upcoming budget, there may be targeted tax incentives and reforms aimed at boosting the startup ecosystem further.
Potential measures could include tax breaks for research and development activities, easier access to capital through tax credits, and a friendlier tax environment for early-stage startups. These changes would not only encourage innovation but also contribute to job creation and economic growth.
Easing the Compliance Burden
Tax compliance can often be a cumbersome process for businesses and individuals alike. The 2024 budget may address this concern by introducing measures to simplify the tax filing process and reduce the compliance burden.
This could involve the implementation of a more user-friendly tax portal, clearer guidelines, and increased support for taxpayers navigating the complex landscape of tax laws. Easing compliance would not only benefit individual taxpayers but also contribute to a more business-friendly environment.
Wealth Tax Considerations
The issue of wealth inequality has gained prominence globally, and India may seek to address this concern through potential reforms in the wealth tax domain. The 2024 budget might explore options such as revising wealth tax rates, expanding the scope of taxable assets, or introducing a progressive wealth tax structure.
Such measures would not only generate additional revenue for the government but also contribute to a more equitable distribution of wealth in the country.
Conclusion
As we stand on the cusp of the 2024 Indian budget, the anticipation of income tax reforms is palpable. The government’s approach to taxation plays a pivotal role in shaping the economic landscape and influencing individual financial planning and business strategies.
While these anticipated changes provide a glimpse into potential reforms, it is crucial to remember that the final budget may bring surprises and unexpected shifts in policy. As taxpayers, businesses, and industry experts eagerly await the unveiling of the budget, one thing is certain – the decisions made will have a profound impact on the nation’s economic trajectory in the year ahead.
CA Ruchika Bhagat is MD, Neeraj Bhagat & Co.
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Published: 23 Jan 2024, 10:43 AM IST
