Union Budget 2024: What can the govt do to ease the taxpayer’s burden?

The Finance Minister will present the full year Budget in Parliament in July. From a personal tax perspective, going by past trends, the government is expected to continue its focus on promotion of new tax regime, and making structural changes in the tax system, instead of changing the tax rates or providing for tax breaks to individual taxpayers. One can expect the government to focus more on the New Tax Regime, faster processing of tax refunds, robust tax collection machinery and in speedy disposal of appeals and grievance redressals. Some areas that could ease taxpayer’s burden or simplify compliance for the taxpayers are explained below.

Government has been focused towards simplifying tax regime. Towards this, some of measures that could be taken by the Government to make the new regime attractive is by enhancing the limit of standard deduction from Rs 50,000 to Rs 100,000. This will benefit the salaried class and will be a welcome step, especially in this time of comparatively high inflation rates that the economy has seen in the last couple of years. 

Another possible change could be to extend the health insurance deduction under the new regime. Currently, section 80D allows deduction for health insurance premium under the old tax regime. In order to incentivise the new tax regime and promote adoption of health insurance cover, such deduction may be extended under the new tax regime. Also, in light of rising healthcare costs, limits of such deduction may be enhanced, which will help in lowering overall cost of health insurance and ultimately incentivize availing of adequate health insurance covers. 
There is a growing demand for electric vehicles. However, from a tax point of view, there is no specific provision for computation of perquisite value of motor car, under the category of electric vehicle. This discourages the employer to include EVs under their car lease scheme. A suitable clarification in the valuation rules would be a welcome step. 

Another area of consideration could be to make the TDS compliance at the time of purchase of property from a non-resident seller, less complex and hassle free, for the buyer of the property. Currently, when an individual purchases a house from a non-resident, (let’s say an NRI), tax is required to be deducted by the buyer at a higher rate (vis-à-vis 1% rate applicable in case of resident seller). Also, the buyer is required to obtain a Tax Deduction Account Number (TAN), and file an e-TDS return in Form 27Q. Since, purchase of the property (from a non-resident) is not a recurring transaction, requirement to obtain TAN results in additional compliance burden. To address this, TDS process in such cases may be eased by introducing challan-cum-return statements, applicable, when the buyer is purchasing from the resident seller. 

Rationalization of TCS (Tax Collection at Source) provision will help in reducing hardship faced by employees of multi-national companies, when they have to remit money outside India to purchase shares of overseas parent company under stock incentive schemes. In the Union Budget of 2023, tax collection at source (TCS) for foreign remittances under the Liberalised Remittance Scheme (LRS) was raised from 5% to 20%. Employees who are provided with an option to participate in the stock incentive plans of overseas parent company, on acquisition of such shares are treated as payment under LRS, which is subject to TCS levy. Such taxpayers are already paying tax on income arising from the exercise of stock options. Hence, TCS may be exempted for such transactions, which will ease the cash flow situation of concerned employees.

Above changes, if carried out, will help in easing the tax and compliance burden of the individual taxpayers.

Views are personal. The author is Partner, Deloitte India