Budget 2024: double standard deduction with inflation in mind, says KPMG
Irrespective of the tax regime, KPMG said, the capital gains tax structure in India today is tiered and has different rates for different types of assets. | Illustration: Binay Sinha
A doubling of the standard deduction to Rs 100,000, an increase in the tax deduction on interest paid on mortgage loans and a rationalisation of the capital gains tax regime are some of the expectations that consultancy firm KPMG has for the 2024-25 budget, which will be presented in Parliament on July 23.
There has been a significant increase in medical expenses, fuel costs and overall inflation. Given the increase in personal expenses, it is widely expected that the standard deduction will be increased to Rs 1 lakh from the existing limit of Rs 50,000, KPMG said in a note.
To generate more net disposable income that can be spent on consumer goods or saved, it is a common expectation that the basic tax exemption under the new standard tax regime will be increased from Rs 3 lakh to Rs 5 lakh, the report said.
On mortgage lending, the bank said pressure on the real estate sector is increasing due to recent interest rate hikes and regulatory reforms.
To address these challenges and encourage home ownership, it is proposed that the government reconsider allowing deductions for interest on loans for self-occupied houses even under the new standard tax regime or increase the deduction under the old tax regime to at least Rs 3 lakh, the statement said.
Irrespective of the tax regime, the capital gains tax structure in India today is tiered and different rates apply to different types of assets.
Even the period over which an asset is considered long-term (versus short-term) varies significantly. For example, it is 12 months for listed equities, 24 months for real estate and 36 months for debt instruments, the report said.
“While there may have been historical reasons to create a complex structure in line with this Government’s stated objective of simplifying the tax system, it may be worthwhile to adopt a more uniform capital gains tax structure (in terms of both the holding period and the tax rate),” the report said.
From the customs perspective, the government is expected to continue to focus on aligning tariff changes with the industrial policy objective of encouraging greater value addition in India.
Coordination on tariff changes and the rollout of technical barriers to trade is also expected to continue, the report said.
(Only the headline and image of this report may have been edited by Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)
First print: Jul 14, 2024 | 6:21 PM IST