Budget 2025 Income Tax Expectations: Finance Minister Nirmala Sitharaman should consider increasing the basic exemption limit from Rs 3 lakh to Rs 5 lakh under the new tax regime, EY has said in its pre-Budget 2025 recommendations.
Leading consultancy firm EY, one of the Big Four, has also recommended that the government reduce income tax rates, especially for lower class taxpayers, and continue to rationalize TDS. union budget 2025,
EY said, “The focus should be on the upcoming budget personal tax relief The new tax regime includes increasing the basic exemption limit from Rs 3 lakh to Rs 5 lakh and reducing tax rates. There is a need for clear guidelines for taxation of cryptocurrencies and non-fungible tokens (NFTs), including clarification on perquisite valuation for EVs and treatment of virtual digital asset (VDA) losses.
- EY also said the limit on offsetting losses on domestic property against other items should be removed.
- Including tier-2 cities like Hyderabad, Pune, Bengaluru and Ahmedabad in 50% HRA exemption will provide tax parity.
- Further simplification is required for employer contributions of more than Rs 7.5 lakh to the specified fund. Postponing TDS on PF interest (above Rs 2.5 lakh) till the withdrawal stage will reduce the compliance burden.
- The ESOP tax deferment benefit should be extended to all employers, allowing tax payment at the sales level.”
The government will present the Union Budget on February 1, 2025, which will outline the income tax slabs and various tax incentives for FY 2025-26.
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The Modi government has started efforts to streamline income tax laws. In the Budget 2024 presented in July 2024, Finance Minister Nirmala Sitharaman announced a review of the Income Tax Act, 1961. “It should follow a consultative approach and invite public comments on draft proposals,” EY says.
Over Rs 31 trillion is lost due to income tax litigation in FY 2023-24, which is 9.6% of India’s GDP. EY’s press release emphasizes the urgent need to prevent new disputes as well as address and reduce pending disputes.
