Tax Rebate Hike Expected In Interim Budget

The interim budget preceding general elections may bring minimal changes; however, expectations rise for an increased tax rebate under the tax regime, as reported by the media. It is also said that the plan is to raise the tax rebate, currently available for income up to Rs 7,00,000, to about Rs 7,50,000 under the new regime.

"This relief is overdue and should surely happen. Currently, the tax payable for Rs 7,50,000 lakh is 36,400, including a a cess of 4 per cent. It will be zero and an individual will save Rs 31,200, which is additional disposable income and will be a welcome relief for lower-income earners," said MyMoneyMantra's Founder, Raj Khosla.

On the other hand,  IndiaFirst Life Insurance's Chief Financial Officer, Kedar Patki, is expecting an increase in the 80C limit from Rs 1,50,000. "As this is an interim budget, the centre is not likely to make any major announcements. Our Finance Minister has also said that the upcoming budget will be presented only to meet the requirements of expenses. However, we expect the 80C limit of Rs 1,50,000 lakh to increase, which is a long-pending wish of most of the taxpayer," said Patki.

While the industry is optimistic about the changes, Chintan Ghelani, Associate Partner, Direct Tax, N.A. Shah Associates has his own take. He said, "Since the FM in her recent interaction had indicated that there will not be any populist announcement in the interim budget, any change in tax slabs or an increase in the rebate threshold of Rs 5,00,000 is unlikely. However, a person earning income in a bracket of Rs 7,00,000 to Rs 7,50,000 and not able to claim investment-linked deductions can opt for a new tax regime and reduce their tax burden from around 65,000 to 31,000.

Ghelani also added, "But it is important to mention that if there is any increase in rebate, then it will be an additional boon to all the salaried class. It will be important for the taxpayers to get exemptions adjusted to inflation. If the rates are changed in the old tax regime, we may also see changes in the new regime to make it lucrative."

There are currently two different Income Tax regimes and taxpayers can avail of tax benefits under both. In the Union Budget 2023, the finance minister announced an increase in the income tax rebate under the new regime, raising it to Rs. 7,00,000 from the previous limit of Rs. 5,00,000. Additionally, the surcharge rate on income of Rs. five crore and above has decreased from 37 per cent to 25 per cent.