India's interim budget, scheduled for February 1, comes amid concerns about high inflation and taxpayer anxieties over shrinking disposable income. While major pronouncements are unlikely, four key areas will be closely watched: tax exemptions, investment limits, tax rates, and infrastructure spending.
Exceeding Limits, Seeking Relief: Many taxpayers have maxed out their investment limits, leaving them hesitant and seeking alternatives. With Lok Sabha elections looming, the government might consider tax concessions to appease voters.
NPS Exemption: Increasing the tax deduction limit under Section 80C could incentivize investment in the National Pension Scheme (NPS), potentially making withdrawals more tax-friendly.
Home Loan Deduction: Salaried employees might see a separate deduction for home loan repayments. The last raise in the 80CCI deduction limit, from ₹1 lakh to ₹1.5 lakh, was in 2014. Proponents hope for a further increase to ₹2.5 lakh, encouraging investment in various schemes and benefiting both the government and businesses.
Change in Tax Slab: No changes have been made to the old tax system's slabs since 2014, raising the tax burden for many. Calls for a revamped tax structure have grown over the years. Some propose a system with no tax on income up to ₹3 lakh and a 5% tax on income between ₹3 lakh and ₹6 lakh.