Budget 2024 income tax: Basic exemption limit should be increased to Rs 3.5 lakh - here’s why

Budget 2024 income tax: Finance Minister Nirmala Sitharaman is scheduled to present the upcoming Interim Budget 2024 on February 1. Like every year, there are expectations of a relief on the personal income tax front. Suresh Surana, the founder of RSM India, recommends increasing the basic exemption limit from 2.5 lakh to Rs 3.5 lakh.

RSM India founder has pointed out that the current basic exemption limit of Rs 2.5 lakh has remained unchanged since 2014. While a standard deduction of Rs 50,000 was introduced three years ago, it only applied to salaried taxpayers, providing limited relief, Surana told ET. In light of the persistent high inflation and the escalating cost of living since the last revision, there is a strong case for increasing the basic exemption limit to Rs 3.5 lakh, he said.



He also stated that this proposed adjustment would extend benefits to a substantial portion of the approximately 7 crore taxpayers, acting as a cushion against inflationary pressures.

An analysis by ET, recognises the fiscal challenges faced by the government in managing the deficit, but also acknowledges the need for a delicate balance between fiscal responsibility and providing relief to taxpayers.



What did Budget 2023-2024 offer
Under the new tax regime, the basic exemption limit has increased from Rs 2.5 lakh to Rs 3 lakh, a rise of Rs 50,000. If you opt for this new regime for the fiscal year 2023-24, it's not mandatory to file returns if your gross taxable income is below Rs 3 lakh. This change lets those choosing the new tax regime save up to Rs 15,000 (30% of Rs 50,000) during ITR filing. In contrast, the old tax regime maintains a basic exemption limit of Rs 2.5 lakh. Therefore, individuals with a gross taxable income between Rs 2.5 lakh and Rs 3 lakh are likely to benefit more from the new tax rules.