Union Budget 2025: Meeting taxpayer demands in an inflationary era

Simplification of the taxation system

A cardinal request from Budget 2025 is the simplification of India’s taxation system.

The authorities has been proactive successful addressing the complexities successful the existing taxation laws, arsenic evidenced by caller reforms, including the enhancement of taxation rebate nether conception 87A of the Income-tax Act, 1961 (ITA) successful 2022, making the Concessional Tax Regime (CTR) the default authorities successful 2023, and restructuring the CTR successful 2024 by reducing the taxation slabs and expanding modular deduction limit. Budget 2025 is expected to proceed this trajectory by further streamlining the taxation strategy and simplifying compliance requirements.

Raising the income-tax exemption limit

One important expectation from Budget 2025 is an summation successful the basal income taxation exemption bounds from Rs 3 lakhs to Rs 5 lakhs successful the caller taxation regime. This determination would straight payment taxpayers by providing much-needed fiscal alleviation peculiarly for the mediate and lower-income groups, who are facing inflationary pressures connected regular essentials.

Some of the different items connected the wish-list for Budget 2025 include:

Widening of House Rent Allowance (HRA) Exemption
Currently, lone 4 metro cities — Delhi, Mumbai, Kolkata, and Chennai — suffice nether the bracket of 50 per cent of basal wage for calculation of HRA exemption. However, Tier-2 cities similar Hyderabad, Pune, Bengaluru, Gurgaon and Ahmedabad, wherever lodging costs are likewise high, bash not person the aforesaid benefit. Hence, including these cities arsenic good nether the 50 per cent bracket would guarantee greater taxation parity and supply alleviation to a broader conception of the moving colonisation surviving successful these cities.

Removal of oregon summation successful the headdress of Rs 2,00,000 connected set-off of house-property loss
Currently, the magnitude of location spot nonaccomplishment that tin beryllium set-off against different heads of income successful the aforesaid fiscal twelvemonth is capped astatine Rs 2,00,000. Removal of oregon an summation successful this ceiling bounds would let taxpayers much flexibility successful offsetting their losses, thereby reducing their wide taxation burden.

Deferment of taxation deduction astatine root connected provident money (PF)

At present, the PF authorities deduct taxation astatine root (TDS) connected the involvement earned connected employee’s publication successful excess of Rs 2,50,000 per annum portion crediting the interest. Deferring this TDS to the signifier of withdrawal/ cessation of employment would align the signifier of taxation of this involvement with that of the involvement connected wide PF corpus.

The Union Budget 2025 presents an accidental for the authorities to instrumentality reforms that code the complexities of idiosyncratic income taxation arsenic taxpayers eagerly await a simpler taxation system. With proposals to summation the income taxation exemption limit, trim taxation rates for lower-income groups, amended the wide taxation strategy etc., Budget 2025 could importantly reshape India’s taxation landscape. These reforms could payment taxpayers, beforehand economical development, and foster sustainable maturation crossed the country.

Surabhi Marwah is taxation spouse astatine EY India. Ammu Sadanandhan, director, taxation and Ojaswita Pathak, taxation professional, EY India besides contributed to the article.