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 fastest growing city of the country. Adding Bengaluru, NCR, Pune and Hyderabad to the list of metro cities for the purpose of HRA exemption will ease the burden of a large population of salaried taxpayers residing in these cities.
Another area of consideration in Budget 2024 could be to provide for valuation rules for electric vehicles (EV).EVs are increasing in popularity against the backdrop of enhanced availability of suitable infrastructure facilities and the impetus given by the government through various policy measures – relief on road tax, registration fees, etc. However, Indian tax law does not provide for specific perquisite valuation rules for EVs. This creates ambiguity and discourages inclusion of EVs in the car schemes provided by employers. Therefore, it becomes incumbent that the tax rules for perquisite valuation of motor cars also factor in EVs and include aspects such as reimbursement of cost incurred in relation to maintenance and recharge of batteries, and battery capacity (instead of engine capacity).
Taxpayers’ wish list would also include extending the due date for filing belated or revised tax returns beyond December 31.
At times, taxpayers face a burden for not being able to claim appropriate tax relief on account of the limited timeline for filing revised tax returns to claim tax refund. This is seen among globally mobile individuals, who rely on tax relief (including foreign tax credit or FTC) under the applicable tax treaties in order to mitigate double taxation. As many overseas jurisdictions follow the calendar year as their tax year, there is a need to extend the due date for filing belated or revised tax returns in India beyond 31 December. This will provide significant relief to taxpayers who can claim appropriate tax relief (FTC) in their India tax return, avoiding the challenge of lapsed tax refund claims.
Such changes in the tax provisions will not only result in cash savings but also pave the way for a more simplified and efficient tax system.
(The author is Partner, Deloitte India)