As the Union Budget 2025 approaches, taxpayers and financial analysts are keenly awaiting potential reforms in personal income tax that could impact disposable incomes and overall economic growth. Finance Minister Nirmala Sitharaman is expected to present the budget on February 1, 2025, and several key changes are on the wishlist of individual taxpayers.
1. Increase in Basic Exemption Limit in Union Budget 2025
One of the primary prospects of Union Budget 2025 is an increase in the introductory impunity limit under the Concessional Tax Regime( CTR). presently, the introductory impunity limit stands at ₹. Raising this limit to ₹ would give significant relief to taxpayers across colorful income classes. For case, individualities with a taxable income between ₹ to ₹ could see a duty reduction of ₹ 10,400, while those earning between ₹ to ₹ might profit from a duty saving of ₹ 11,440, subject to borderline relief. This move aims to enhance disposable income, thereby stimulating consumer spending and profitable exertion.
2. Clarification on Perquisite Valuation for Electric Vehicles (EVs)
In Union Budget 2025 , With the adding relinquishment of electric vehicles, there’s a pressing need to modernize the perquisite valuation rules under the income- duty law. presently, these rules are grounded on the boxy capacity of motor buses , a metric not applicable to EVs. The absence of specific vittles for EVs creates nebulosity in determining the taxable value of similar perquisites. Clear guidelines would prop employers and workers in accurate duty calculations and promote the use of environmentally friendly transportation.
3. Taxation of (VDAs) in Union Budget 2025
The rapid growth of virtual digital assets, including cryptocurrencies and non-fungible tokens (NFTs), has outpaced existing tax regulations. Taxpayers are seeking comprehensive guidelines on the taxation of VDAs, encompassing aspects like capital gains treatment, reporting requirements, and applicable tax rates. Clear directives would ensure compliance and prevent potential disputes arising from the current regulatory vacuum.
4. Increase in House Property Loss Set-Off Limit
Under current regulations, the set-off of loss from house property against other income is capped at ₹2,00,000 per annum, with the remaining loss carried forward for up to eight years. Given the rising costs associated with housing loans and property maintenance, there is a demand to raise this limit. An increased cap would provide substantial relief to homeowners, particularly those with significant housing loan interest outflows.
5. Expansion of HRA Exemption to More Cities in Union Budget 2025
The existing provisions for House Rent Allowance (HRA) exemptions are primarily focused on metropolitan cities. Taxpayers are advocating for the expansion of HRA exemptions to include a broader range of cities, reflecting the urbanization and rising living costs in non-metro areas. This change would offer equitable tax benefits to salaried individuals residing in various urban centers across the country.
6. Tax Deferral on Employee Stock Ownership Plans (ESOPs) for All Employees
Currently, the tax deferral benefit on ESOPs is limited to employees of eligible startups. Extending this benefit to employees across all sectors would encourage wider participation in ESOP schemes. Such a move could enhance employee retention and motivation, aligning individual interests with organizational growth.
7. Simplification of Personal Tax Compliance and Enhanced Transparency
The Income Tax Department has made significant strides in digitizing tax-related processes, leading to quicker processing of income tax returns and enhanced transparency through tools like the Annual Information Statement (AIS) and Tax Information Summary (TIS). However, there is room for further improvement. For instance, ensuring that the AIS comprehensively captures the entire break-up of salary income would aid taxpayers in accurate reporting and compliance.
8. Rationalization of Capital Gains Taxation
The current Union Budget 2025 capital gains tax structure is complex, with varying holding periods and tax rates for different asset classes. A simplified and consolidated approach to capital gains taxation would reduce administrative burdens and enhance clarity for taxpayers. Streamlining holding periods and unifying tax rates could encourage investment and improve compliance.
9. Adjustments Union Budget 2025 to Standard Deduction in
The standard deduction for salaried employees currently stands at ₹50,000. Considering inflation and rising living costs, there is an expectation for this deduction to be increased. A higher standard deduction would reduce the taxable income for salaried individuals, providing additional financial relief.
10. Re-evaluation of Surcharge and Cess Rates
In Union Budget 2025 High-income earners are subject to additional surcharge and cess, leading to an effective tax rate that can exceed 42%. There is a call to re-evaluate these rates to ensure a balanced approach that maintains revenue while not discouraging high earners. A rationalized surcharge and cess structure could make the tax system more equitable and competitive.
Conclusion : Union Budget 2025
The Union Budget 2025 presents an opportunity for the government to address these expectations, thereby simplifying the tax regime, enhancing transparency, and providing relief to individual taxpayers. Implementing these changes could lead to increased disposable incomes, higher consumer spending, and overall economic growth. As the budget announcement approaches, taxpayers remain hopeful for reforms that align with their aspirations and the nation’s economic objectives.
Note: The information provided is based on expectations and analyses leading up to the Union Budget 2025. Actual provisions may vary based on the final announcements by the Finance Minister.
