The Expectations for Income Tax in Budget 2024
As we anticipate the first full Union Budget of 2024 to be presented by Finance Minister Nirmala Sitharaman in July, salaried individuals are hoping for some relief when it comes to income tax. It has become a tradition for taxpayers to eagerly await any changes in tax rates, income tax slabs, or deductions that might benefit them.
One particular relief being sought after is the expansion of non-metro cities in the 50% House Rent Allowance (HRA) exemption list. HRA is a significant component of many employees’ compensation packages, entitling them to a tax exemption on the allowance under the old income tax regime.
HRA Expectations in Budget 2024
Under Section 10(13A) of the Income-tax Act, 1961, employees claiming HRA exemption can receive the lowest of the following amounts:
1. Actual HRA received.
2. Actual Rent paid minus 10% of the basic salary.
3. 50% of basic salary for metro cities or 40% for non-metro cities.
Currently, residents in Delhi, Mumbai, Kolkata, and Chennai are eligible for a 50% exemption on HRA, while other locations fall under the 40% category. However, this classification was established over three decades ago and may not reflect the present economic status of cities.
With the rapid urbanization of non-metro cities like NCR, Bangalore, Pune, and Hyderabad, it is essential to reevaluate the categorization of metro and non-metro cities for tax purposes. Many individuals in these cities end up paying higher rents but receive lower tax benefits, creating a financial burden.
As more people move to non-metro cities for job opportunities, the government should consider revising the regulations for claiming rent exemptions to provide relief to taxpayers in these regions.
