Budget 2024: Relief on buying EV, HRA rationalisation, higher tax deduction on health insurance premium and more, what to expect
Budget 2024, scheduled in July, one may expect the government to continue with its objective of moving towards a simplified tax system through the new tax regime (NTR) that was introduced in Union Budget 2020-21.
With a view to make the NTR more attractive for individual taxpayers, the government could consider taking measures such as increasing the standard deduction limit from Rs 50,000 to Rs 100,000; including health insurance premium (u/s 80D) in this regime and enhancing the deduction limit available to promote adoption of adequate health insurance cover. Besides, an increase in deduction limit for employer's contribution to the National Pension System (NPS) u/s 80CCD(2) from 10% of basic salary to 14% will be a welcome move. The enhancement of this deduction will ensure parity with the provision applicable for central and state government employees and would provide an option for enhanced tax saving under the new tax regime, along with promoting long-term retirement savings.
However, in case the government continues with the old tax regime as an option, it will be important to rationalise some of the tax provisions. One such provision will be to consider Bengaluru as a «metro city» for the purpose of HRA exemption in Budget 2024.
Currently, tax exemption for HRA is capped at 50% of basic salary if the rented accommodation is in Delhi, Mumbai, Chennai or Kolkata; and at 40% of basic salary if the rented accommodation is in any other city. Bengaluru is still not recognised as a metro city despite being the
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