As the Union Budget 2025 approaches, scheduled for presentation on February 1, 2025, Indian taxpayers and investors are keenly awaiting announcements from the Finance Minister. The hope is for measures that will not only alleviate the tax burden but also foster a conducive environment for investment and economic growth.
Expectations from Individual Taxpayers
- Revision of Basic Exemption Limit: One of the primary expectations is an increase in the basic exemption limit to INR 5 lakh under the Concessional Tax Regime (CTR). is also expected that the government will review the overall existing tax rates under both the old tax regime and the CTR.
- Clarification on Employer Contributions: In the 2021-22 tax year, the government introduced provisions to tax employer contributions to retirement funds (provident fund, superannuation and National Pension System) exceeding ₹7.5 lakh. However, ambiguities remain regarding the identification of funds and the methodology for computing accretions. Taxpayers hope the budget will address these issues, providing clarity and fairness.
- Revisiting Gift Tax Threshold: Currently, any gift exceeding ₹50,000 is taxable. Taxpayers expect the government to increase this threshold to ₹1,00,000, which would allow for more generous gifting without tax implications.
- Streamlining TDS Compliance for Non-Residents: Under current provisions, if a person pays an amount to a non-resident individual taxable in India, they must deduct tax and comply with TDS requirements. If the non-resident believes tax should not be deducted, they must apply for a certificate from the tax officer for lower or NIL deduction. It’s expected that the government will either revise the tax rate for non-residents or simplify the process for obtaining the certificate and reporting TDS.
- Timely Disposal of Appeals: Unlike scrutiny proceedings, there is no fixed timeline for disposing of tax appeals, leading to undue hardship for taxpayers. Many have faced long delays, causing refunds for non-disputed years to be adjusted against tax demands from years under appeal. Taxpayers hope the government will establish specific timelines for appeal resolutions.
Expectations from Investors
- Reduction in Long-Term Capital Gains (LTCG) Tax Rates: Investors hope for a reduction in LTCG tax rates to make long-term investments more attractive. For instance, a reduction from the current 12.5% to 10% could incentivize sustained investment in the equity market.
- Rationalization of GST on Financial Products: Investors hope for the rationalization of Goods and Services Tax (GST) on various financial products, including mutual funds and insurance, making them more accessible to a wider audience.
- Support for Startups and Innovation: Investors are keen on government support for startups, particularly through tax breaks for angel investors and venture capitalists. Such measures would promote innovation and attract more funding to the startup ecosystem.
Conclusion
As the Union Budget 2025 approaches, both individual taxpayers and investors harbor significant hopes for reforms that will enhance their financial well-being. By addressing critical issues such as tax exemptions, compliance burdens, and incentives for investment, the government has the opportunity to create a more favorable economic landscape. Ultimately, the budget will play a crucial role in shaping India’s economic trajectory, fostering growth, and enhancing the financial security of its citizens.
This budget is not just about numbers; it represents an opportunity for the government to align its policies with the aspirations of its taxpayers and investors, setting the stage for a more prosperous future.
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