Budget 2024: Big tax relief for middle-class in the offing? Section 80C, 80D deduction limits may be hiked to …

Modi 3.0 Budget: The Narendra Modi-led NDA government will present next month its first budget of the third term, which began after 72 members from the BJP and its alliance parties took oath as Cabinet and junior ministers. Nirmala Sitharaman’s finance portfolio has not been changed, paving the way for her to present her 6th full-fledged Union budget in July. She also presented the interim budget in February this year ahead of the Lok Sabha polls 2024.

Focus shifts to Union Budget 2024-25

After the new government formation, the focus is now shifted to the Union Budget 2024-25. Taxpayers are hopeful that the Modi government will give them a tax relief in the upcoming budget. Experts too are of the view that FM Sitharaman would at least make some revision in deduction limits under Section 80C and 80D.

The last time the government revised the Section 80C deduction limit was in Union Budget 2014-15, raising the threshold of tax benefit under this Section to Rs 1.5 lakh to Rs 1 lakh then. For middle-class taxpayers, 80C is the most crucial section in terms of deduction benefits. Under Section 80C, taxpayers get tax benefits on investments like PPF, NPS, small savings, life insurance, ELSS, ULIPs, home loan principal repayment and several others.

Section 80C deduction limit insufficient 
The existing deduction limit of Rs 1.5 lakh under Section 80C is widely seen as insufficient by taxpayers in light of rising inflation and financial responsibilities. Therefore, taxpayers and tax experts both are hopeful that the upcoming budget will introduce some major changes as far as direct taxation is concerned.

“Reforms that benefit the middle class, such as increasing the basic exemption limit to reflect the rising cost of living, are particularly anticipated. Additionally, the current deduction limit of Rs 1,50,000 under Section 80C is inadequate compared to the inflation rate and growing financial burdens, necessitating an increase in deductions under Chapter VI-A of the Income Tax Act,” says Sakchi Jain, a CA and financial educator.

Simplifying the tax code is another demand

As the Modi government has started its third term, taxpayers are eagerly anticipating reforms for a clearer and more efficient tax system, she said, adding that simplifying the tax code to make compliance easier for the general public, such as reducing tax slabs and streamlining exemptions, is a key expectation.

Enhancing digital infrastructure within the tax administration to reduce processing times and improve transparency is also crucial, according to her.

Expecting some possible tax relief measures in the upcoming budget, Sujit Bangar, Founder, Taxbuddy.com, said, “Deduction against school fees may be decoupled from section 80C and separate deduction may be offered for this purpose. It shall further boost the spending on school education. Fees other than tuition fees may also be included for this deduction.”

The deduction available u/s 80D may be enhanced to Rs 75,000 from existing Rs 25,000 in order to promote health insurance in view of rising healthcare costs, he said.

On being asked whether the government will continue with two tax regimes, Bangar is of the view that two regimes are certainly creating confusion in the minds of return filing taxpayers. “It shall be better if we keep single tax rates regime instead of two.”

Further, he said that the deduction against self-occupied house property may be enhanced to Rs 3 lakh since the annual lettable value has also increased.

Bangar also wants the government to initiate measures towards simplifying the tax filing process and reduce administrative burdens on taxpayers.

Every year many individuals receive their Form 16 very late as many companies would be issuing Form 16 to their employees as late as July, he said. Many taxpayers have issues concerning TDS done vis a vis tax regime to be followed and many instances have been noticed where pre-fill is not fully updated with latest data, he pointed out.

“These issues are creating certain difficulties for salaried tax payers while filing ITRs. Individuals with professional/ freelancing income have witnessed similar issues regarding delay in getting Form 16A. In view of these hardships, it’s advisable that the due date for filing ITR can be extended by a month to 31st August,” he added.