Budget 2024Will new income tax regime get another boost?

The new income tax regime received a host of benefits in the Union Budget 2023-24, and it could further get a boost in the upcoming Interim Budget set to be presented on February 1.

Introduced in the Union Budget 2020-21, the new tax system became the default option from April 1, 2023, offering taxpayers an alternative to the old regime.

Last year Finance Minister Nirmala Sitharaman made some adjustments, reducing the surcharge for higher-income individuals and allowing a standard deduction of Rs 50,000.

The new income tax regime could get further boosts.

Increase in the basic exemption limit

As the government gears up to present its interim budget ahead of the general elections, salaried individuals are hopeful for positive changes.

Abhishek Soni, CEO and Co-founder of Tax2win, told livemint.com about the expectation of an increase in the basic exemption limit for both the old and new tax regimes.

Additionally, individuals are looking for a boost in the standard deduction limit, HRA exemption, and health insurance premium deduction under the new regime.

NPS limit increase

Kurian Jose, CEO of Tata Pension Management, recommends a hike in the limit of the National Pension Scheme (NPS) to Rs 1,00,000 for both tax regimes. This move could incentivise individuals to consider the new tax system.

Deduction for interest on housing loans

Salaried individuals with housing loans are cautious about shifting to the new tax regime due to the potential loss of home loan interest deductions.

Abhishek Soni suggests that extending the deduction for interest on housing loans to the new tax regime could make it more attractive. Many middle-income taxpayers with housing loans would find this benefit appealing.

Recap of changes made in Budget 2023

In the previous budget, Sitharaman adjusted the slab rates for individuals opting for the new income tax regime:

• No tax on income up to Rs 3 lakh
• 5 per cent tax on income between Rs 3-6 lakh
• 10 per cent tax on income between Rs 6-9 lakh
• 15 per cent tax on income between Rs 9-12 lakh
• 20 per cent tax on income between Rs 12-15 lakh
• 30 per cent tax on income of Rs 15 lakh and above