Extended EV loan benefits, increased home loan, FD interest deductions: What small savers want from Budget '24

Businesses are now calling for stable and simplified tax laws to enhance the ease of doing business.

As India gears up for the 2024 union budget, expectations are high about potential reforms in personal taxation, ranging from increased deductions for interest on home loans, savings, and fixed deposits,  to extended benefits for EV (electric vehicle) loans, and more.

The landscape of personal taxation in India has evolved significantly over the years, shaped by economic reform, changing fiscal policies, and efforts to simplify the tax structure.

In recent years, significant changes have been introduced, such as the introduction of the concessional new tax regime under section 115 BAC of the Income Tax (I-T) Act, aimed at simplifying tax compliance and reducing the tax burden for individuals. This regime offers concessional tax rates but restricts many exemptions and deductions available under the old regime. The Finance Act, 2023, made the new regime the default option for taxpayers, unless they specifically opt for the old regime.

The budget is also expected to focus on employment generation, and rationalise tax rates by increasing limits for basic tax exemption, standard deductions, medical expenses, and certain social security investments.

Accordingly, some of the key changes that individuals can expect from the upcoming budget are as under:

Extending the timeframe for  tax-deductible EV loans

Per  section 80 EEB of the I-T Act, individuals can claim deductions of up to Rs 1,50,000 against the interest on a loan taken from a financial institution to buy an electric vehicle (EV). However, the  loan must have been  sanctioned on or before 31st March 2023. But considering the overall push towards environmental sustainability and also in order to encourage individuals to opt for EVs over non-renewable fuel driven vehicles, it is recommended that the timeframe for taking a loan is extended to 31st March 2027.

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Grant of full TDS credit appearing in Form 26AS

Per existing regulations, taxpayers are not granted the full TDS (tax deducted at source) credit appearing in Form 26AS when the income shown in the  return is lower than what's reflected in Form 26AS. This may be due to different accounting methods followed by the deductor and the taxpayer, where the tax on income appearing in the current year's Form 26AS may already have been paid  in the preceding financial year.

Thus, neither can the taxpayer claim TDS credit in the preceding financial year in which the tax has been paid (as TDS credit does not appear in Form 26AS), nor in the subsequent year in which it may appear in Form 26AS (as the income as stated in the return is lower than the receipts appearing in Form 26AS), resulting in a loss of the TDS credit for the taxpayer.

Therefore, it is expected that the budget would modify the rules and ensure that TDS credit can be claimed in the year in which it is appearing in Form 26AS, even if gross receipts as per Form 26AS are higher than income shown in the return.

Also read | Budget 2024 expectations: Financial planners wish for more tax benefits in NPS

Increasing the limit on interest income

Section 80 TTA of the I-T Act permits individuals and HUFs (Hindu undivided families) to deduct up to Rs 10,000 per annum in  interest income from savings bank / co-operative society / post office accounts.  As the existing scope of this section is limited, it has been suggested that the same is expanded in order to cover interest on bank / post office term deposits, recurring deposits, etc, and bring more individuals under the ambit of this section.

Moreover, as the threshold limit hasn’t been revised since its introduction in the Finance Act, 2012, it has been recommended that the  limit is enhanced to Rs 40,000, considering the inflation in the past 10 years.

Extending the senior citizens' medical benefit to others as well

Senior citizens (above the age of 60) not covered by health insurance are allowed to claim deductions of up to Rs 50,000 towards actual medical expenses. It is being recommended that this benefit should be extended to others — besides senior citizens — as well, and the amount should be revised upwards to Rs 1,00,000, considering the inflation.

Also read | Budget 2024: Will Section 80C deduction limit be hiked?

Increase deduction on home loan interest payment 

Currently, section 24 (b) of the I-T Act allows the taxpayer to deduct from his income up to Rs 2,00,000  paid by way of  home loan interest.  With increasing interest rates and inflation, this relief is proving inadequate.  Thus, there is a need to increase the interest deduction limit to Rs 3,00,000.

Also read | How AMFI suggestions for Union Budget can help mutual fund investors

Hiking the interest deductible on dividend income 

The Finance Act, 2020, had abolished the dividend distribution tax regime. At present, dividend income on shares or  mutual funds is fully taxable in the hands of shareholders and unit holders. Where the taxpayer has borrowed money to invest in shares, under section 57 of the I-T Act, the taxpayer deduct up to 20 percent of the dividend income from his earnings. It is now expected that the 20 percent limit may be hiked.