By Parizad Sirwalla
Budget 2025 income tax expectations: While the Union Budget 2025 is anticipated to provide further impetus on simplifications of existing tax provisions, there are heightened expectations for economic reforms aimed at reviving the declining consumption in response to the ever-rising cost of living and high inflation. Also, the Budget is of significant interest to individual taxpayers as they have a long wish list of the desired announcements on the personal tax front. Some of the heightened expectations are as under:
Increase in income tax rebate
In the recent past, the finance minister has effected some significant changes in the new income tax regime to attract taxpayers towards the same and making a default tax regime. A full tax rebate is applicable on taxable income up to Rs 7 lakh. This year, there is a further expectation for an increase in the rebate to Rs 10 lakh. Such adjustment would provide much-needed relief to middle-income taxpayers, potentially boosting spending and investment.
Increase in limit of deduction u/s 80C and 80D
For more than a decade, the limit of Rs 1.5 lakhs under Section 80C of the Act has remained unchanged. With the increased cost of living and inflation, the Government may look at increasing the said limit to Rs 3 lakhs under the old tax regime. Similarly, the prevailing limit under section 80D could be revisited from existing Rs 25,000/ Rs 50,000 (as applicable) to higher limits respectively considering the cost towards medical treatment as well as comprehensive insurance premium have increased manifold over the years. And allowing such medical insurance premium as a deduction under the new tax regime may be considered.
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Housing tax break
To boost the momentum in the real estate sector, one can expect an increase in tax benefits for home buyers. This could include increased deduction on home loan interest or principal repayment. Currently, the overall limit to claim loss under the head income from house property is restricted to Rs 2 lakhs p.a. This limit should be revisited and enhanced to, say Rs 3 lakhs p.a., to provide further impetus to the ‘housing for all’ initiative and also a proposal to evaluate the said deduction be allowed under the new tax regime.
Simplification of TDS process for buyers purchasing immoveable property from non-resident sellers:
Currently, if a property seller is a resident, buyers must deduct tax at 1% of the consideration if the property value is Rs 50 lakhs 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.
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Whilst the wish list is high from a common man, it is also an opportune time for the Government to set the tone for accelerating economic growth by making policy announcements and addressing structural challenges facing the country. It will be an interesting budget to watch out for on February 1, 2025.
(The author is Partner & Head, Global Mobility Services – Tax, KPMG in India)
