Budget 2024-25: Staffing firms anticipate tax relief and 9% PF interest rate

In addition to broader fiscal expectations, industry leaders urged the government to consider increasing the interest rates on provident fund accounts to enhance financial returns for the workforce, particularly amid inflationary pressures.

India’s staffing companies anticipate tax relief and a boost in interest rates on provident fund accounts when Finance Minister Nirmala Sitharaman presents the interim budget on February 1.

Besides, head-hunters expect allocations for initiatives that enhance employability. They said investments in training programmes and collaborations between the government and private sector for skill development can help address the evolving needs of the job market.

“Tax relief stands as the most prominent expectation, with a strong desire for increased basic exemption limit from the current Rs 2.5 lakh to Rs 5 lakh, which will significantly reduce the tax burden for lower and middle-income earners and improve spending,” said Balasubramanian A, VP at TeamLease Services.

The budget to be presented on February 1 is unlikely to hold any "spectacular announcements," Sitharaman said on December 7. Since this is an election year, the government will not present a full-fledged budget.

Instead, there will be an interim budget with provisions to manage expenses and revenues for a short period until a new government is elected. A full budget for the remaining portion of FY25 will be presented after the new government takes charge following the general elections due by May.

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Experts also supported increasing limits for deductions allowed under Sections 80C (investments), 80D (medical insurance), and house rent allowance to boost disposable incomes and encourage responsible financial planning.

For salaried individuals and pensioners, the finance minister introduced a standard deduction under the new tax regime during her 2023 budget speech. The old tax regime already offered a standard deduction of Rs 50,000 to salaried employees and pensioners. Combined with the rebate, salaried individuals who earn up to Rs 7.5 lakh need not pay any tax under the new tax regime.

“Encouraging deductions for tuition fees and training courses will promote professional development and lifelong learning, enhancing individual career growth and overall workforce competitiveness,” Balasubramanian said.

‘Implement labour codes’

Four labour codes – on wages, industrial relations, occupational safety, health and working conditions, and social security – were formulated in 2020 to promote ease of doing business. However, the delay in notifying the rules and implementation remains a hindrance for staffing firms to make use of its potential.

With the gig economy gaining prominence, staffing companies are looking for support and recognition of this evolving employment model. Tailored policies and incentives for gig workers could contribute to the overall flexibility and resilience of the job market, they said.

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“We propose measures for the implementation of labour codes, enhancing social security for informal sector workers, increasing healthcare funding, and introducing work-life balance initiatives,” said Aditya Mishra, MD of CIEL HR.

In addition to broader fiscal expectations, industry leaders urged the government to consider increasing the interest rates on provident fund accounts to enhance financial returns for the workforce, particularly amid inflationary pressures.

“It's time to consider boosting the interest rate on PF accounts to a solid 9 percent. This move would significantly enhance employees' retirement corpus, providing them with a more secure financial future,” said VC Karthic, founder of Buzzworks India.

The ministry for labour and employment approved an interest rate of 8.15 percent to the Employees' Provident Fund scheme for FY24.

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“We have always believed that employees’ health and well-being are of utmost importance and expect the government to explore avenues to further support healthcare benefits, insurance coverage, and wellness programmes to ensure a healthy and productive workforce,” said Viswanath PS, MD of Randstad India.