The serving of ‘halwa’ by the finance minister to officials engaged in the Budget making process on 24 January, signifies the formal initiation of the Union budget that will be presented on 1 February. However, this will only be a ‘vote on account’ and not the full-fledged annual regular budget, which will be presented after the general elections that are due in April-May 2024. The finance minister has already said that being a ‘vote on account’, there will not be any ‘spectacular budget announcements’ on 1 February.
In the election year, instead of a full budget, the government passes a ‘vote on account’ through an ‘interim budget’ to seek permission to withdraw funds from the ‘consolidated fund of India’. This withdrawal enables it to meet administrative expenses until the next government is formed, as well as comply with the election code of conduct.
Even though no spectacular budget announcements are expected on 1 February, we can nonetheless hope that, like the sumptuous ‘halwa’, the upcoming Union budget 2024 (expected to be presented in July 2024 as ‘full budget’ by the incoming dispensation) is also being served with all the essential ingredients of a robust economy and stable taxation regime. Increased capex outlays on both physical and digital infrastructure but with a wary eye on fiscal deficit, should be the top priorities in the upcoming budget.
In the personal taxation domain, the government wants more and more taxpayers to switch to the new regime, to reduce the complexities in income tax return filing and assessments arising out of the plethora of deduction claims of the assessees applicable in the old regime. However, the restriction pertaining to the mandatory requirement of forgoing of house rent allowance (HRA) deduction by salaried individuals and the deduction in respect of interest paid on home loan taken for self-occupied property—for availing the benefit of reduced personal tax rates in the new regime—is acting as the main deterrent for such individual taxpayers to switch to the new personal taxation regime.
So, the new tax regime can be made more appealing by allowing in it the deductions in respect of HRA and interest paid on home loan taken for self-occupied house property. Having a roof on one’s head is a basic necessity, so any expenditure incurred towards house rent or interest on home loan should be allowed as deductions in the new personal tax regime as well.
In the old personal tax regime, the current exemption limits in respect of children’s education allowance is ₹100 per child per month and in respect of their hostel expenditure allowance is ₹300 per child per month, for a maximum of two children in a nuclear family. These exemption limits, in respect of the basic necessity of primary education of the children, have not been revised since ages. Thus, there is a dire need to revise these exemption limits in line with the realistic and currently prevailing cost inflation index pertaining to education in primary schools and hostels. Further, like house rent, the child education expenditure is a basic necessity, and as such must also be allowed in the new personal tax regime of reduced tax rates.
Any deduction in respect of donations made to the ‘Shree Ram Janm Bhoomi Teerth Kshetra’ Trust, under section 80G is allowed only in the old personal tax regime. The government should consider allowing the same in the new regime as well, as a special gesture.
Further, it would do well to rationalize the advance tax instalments mandating the payments of 25%-50%-75% instead of the existing 60%-75%-90%. This, along with ensuring more speedy refunds, can result in increased disposable income in the hands of the taxpayers.
Mayank Mohanka is the founder of TaxAaram India and a partner at S.M. Mohanka & Associates.
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Published: 28 Jan 2024, 09:26 PM IST
