Budget expectations : Rs 3.5 lakh income bracket eyes tax-free future

Interim Budget 2024: In the upcoming Interim Budget for the fiscal year 2024-2025, expectations are rife regarding changes in the income tax slabs. Experts suggest that Finance Minister Nirmala Sitharaman may introduce a progressive tax structure, providing relief to the country's middle class.

"It is anticipated that the income tax exemption limit could witness a significant increase, potentially reaching up to 3.5 lakh. If these predictions materialise, individuals earning up to Rs. 3.5 lakh annually might enjoy a tax-free status on their earnings," said Arpit Suri, CA, personal finance expert.

Anticipated slabs: A fair tax horizon

The expected tax slabs for the fiscal year 2024-2025 outline a progressive structure aimed at providing relief across different income brackets. Individuals with an annual income of up to Rs 3.5 lakh are anticipated to be exempt from taxation. For those earning between Rs 3.5 lakh and 6.5 lakh, it is expected that a nominal 5 per cent tax will apply. 

Following this, the proposed tax rates escalate, with individuals in the Rs 7 lakh to 9.5 lakh bracket expected to face a 10 per cent tax, those in the Rs 9.5 lakh to 13 lakh range anticipated to be subject to a 15 per cent tax, and individuals earning between Rs 13 lakh to Rs 16 lakh expected to pay a 20 per cent tax. 

The highest anticipated tax rate of 30 per cent is expected to apply to individuals with earnings of Rs 16 lakh and above.These adjustments aim to provide a more equitable tax structure, offering relief to the lower and middle-income brackets, according to All Web Broad Info (AWBI).

Finance Minister Nirmala Sitharaman is anticipated to exercise pre-election caution, refraining from making major policy announcements during the presentation scheduled for February 1. Instead, a post-election full disclosure is expected, wherein comprehensive budgetary details will be revealed, aligning with the stance of the newly formed administration. 

The budget is projected to encompass estimates for spending, revenue, financial deficit, fiscal year performance, and the outlook for the upcoming fiscal year under the current government. Despite covering various financial aspects, significant policy declarations are not anticipated, reflecting a stance of policy restraint in this budgetary cycle.

Key announcements in 2023-24 Budget

In the previous budget, Finance Minister Nirmala Sitharaman made five notable announcements aimed at benefiting the hardworking middle class. These included rebates, alterations in tax forms, an extension of standard deduction benefits to the new tax regime, a reduction in the maximum surcharge rate, and an expansion of the tax exemption limit on leave encashment for retiring non-government salaried employees.