Budget 2025 expectations on direct taxation

By: Vivek Jalan

There are many expectations on Budget 2025, mainly related to personal and corporare taxation.

On scrapping of the Old Regime totally and rationalising the Income Tax slabs under the new regime, it is a fact that today under the new tax regime, Income Tax has become simpler.

Further, an exemption of Rs.7 Lakhs means that  taxpayers have to pay NIL tax on the same level of Income where they were earlier paying tax. Hence, the Government should consider and make the new regime as the only regime as the Income Tax Act goes for a comprehensive review on 1st Feb 2025.

However, they must also consider easing out the tax rate in the new regime considering the Cost of Inflation of approx. 6% pa and the impact on the present value of money.

It is thus expected that the basis exemption/ rebate be extended to Rs.9 Lakhs for putting in more money in the hands of the middle class. Further, for the established taxpayers with an income of over Rs.15 Lakhs, transition to the new scheme would involve a financial hit. It is expected that the Government would also compensate them. Hence there may be a new slab in the new regime of say Rs.15 Lakhs – Rs.18 Lakhs with a tax rate of 25%.

This would mean more disposable income in the hands of people and a push to consumption which would consequently push the GDP of the Country.

Corporate Tax :

Substantially revamping complex, multiple and redundant TDS provisions leading to confusion and litigation for taxpayers. Also, percentage of deduction in some cases is prohibitive – As of now there are 71 Sections under TDS/TCS; Rates of TDS/TCS is still high inspite of rationalisation in last budget; Also there is overlap between TCS and TDS provisions.

A complete overhaul of TDS/TCS provisions have been represented and is expected in Union Budget 2025 as a part of “Substantially revamping of Income Tax Act” as announced by FM in her last budget speech. It is expected that there may be a single comprehensive Schedule of Rates of TDS (just Like the Customs Tariff Act) with Schedule Notes.

Issuance of TDS/TCS certificates may be withdrawn for Ease of compliances, which will help more than 10 Lakh tax-deductors and Taxpayers. Ease of compliances will certainly help bring improve organised sector.

The author works at Partner Tax Connect Advisory Services LLP – a multidisciplinary PAN India Consulting Firm