By Parizad Sirwalla
Budget 2025 income tax expectations: Ever since the last Union Budget was presented in July 2024, the world has seen significant changes ranging from various elections, global economic slowdown, geopolitical developments, volatile Indian stock markets, etc. Having witnessed all of this, the common man awaits with eager anticipation from the Hon’ble Finance Minister as she gears up to unveil her eighth straight budget. Some of the key expectations that individual taxpayers may have are discussed below.
1. Higher Tax Exemption Limit: It is anticipated that with the thrust of the Government on the adoption of the new tax regime, there may be no changes to the old tax regime. The basic tax exemption limit under the new tax regime is currently at Rs 3 lakh. It is hoped that this limit may be increased to Rs 5 lakh, providing more disposable income for individuals to either spend or save, thereby boosting the overall economy.
2. Increased Rebate: The full rebate of tax is available up to income limit of Rs 7 lakh currently under the new tax regime. It is expected that this limit can be raised to Rs 10 lakh, offering relief to middle income taxpayers and making it easier for them to manage their finances.
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3. Increased Standard Deduction: To protect salaried taxpayers, there is a case in point to increase the standard deduction under the new regime from the current Rs 75,000 to Rs 1,00,000. This increase will help combat inflation and address the higher personal expenses incurred due to changes in work culture, such as working from home, hybrid work, and work from anywhere.
4. Impetus for Housing Sector: In line with the Government’s objective of “Housing for All” and fostering home ownership, it is suggested that the Government reconsider allowing deductions for interest on self-occupied housing loans under the new default tax regime.
5. Tax Benefit for Electric vehicles: To reduce the carbon footprint and move towards clean energy, the Government should reintroduce the deduction provided under section 80EEB (deduction for interest on loan taken to purchase an electric vehicle) and extend it to the new regime as well.
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6. Sale of Property by Non-Residents: Currently, if a property seller is a resident, buyers must deduct tax at 1% of the consideration if the property value is Rs 50 lakh or more and file a challan-cum-statement, which is a simple and convenient process. However, if the seller is a non-resident, the buyer must obtain a TAN for this one-off transaction, deduct tax at a higher rate, and file a TDS return, which is a cumbersome process. The government should consider introducing challan-cum-statement for non-resident sellers akin to resident sellers to simplify the process.
The proposed measures pave the way for significantly improving financial well-being and stimulate economic growth.
(The author is Partner and Head, Global Mobility Services, Tax, KPMG in India)