Inclusion of These Cities in 50% HRA Tax Exemption List Urged for Budget 2024

10 Jan 2024 , 02:17 PM

EY’s Pre-Budget Wishlist for Union Budget 2024 calls for including tier-2 cities like Hyderabad, Pune, Bengaluru, Ahmedabad, and Gurgaon in the list of metro cities for HRA exemption calculation (from 40% to 50% of basic salary).

The tax-exempt part of HRA is determined by the lesser of the actual HRA, 50% of ‘salary’ for metro cities, or 40% for other cities, and the surplus rent paid annually over 10% of the ‘salary.’

‘Salary’ includes basic salary, dearness allowance, and commission based on turnover, while allowances like special allowance aren’t considered for tax-exempted HRA calculation.

EY’s Interim Budget 2024 wishlist for personal taxation and housing proposes:

  – Including tier-2 cities in metro cities for HRA exemption calculation.

  – Removing the Rs 2 lakh cap for set-off of house property loss against other heads.

  – Enhancing the limit for deduction of interest on housing loan for self-occupied property from Rs 2 lakhs to at least Rs 3 lakhs.

EY also advocates an overhaul of the capital gains tax structure with requests to:

  – Standardize the holding period and tax rates across various asset classes.

  – Increase the tax-free LTCG ceiling on the sale of equity shares/mutual funds from Rs 1 lakh to Rs 2 lakhs.

  – Provide a tolerance limit of at least 10% for normative taxation on the transfer of unlisted shares, akin to immovable property.

Other suggestions include increasing the tax-free threshold for gifts from Rs 50,000 to Rs 100,000 and expediting the disposal of pending appeals.

FM Sitharaman is expected to present the Interim Budget 2024 on February 1, 2024. The full-year Budget for fiscal year 2024-25 will be presented by the new government after the Lok Sabha polls in June-July 2024.

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