As Finance Minister Nirmala Sitharaman prepares to present the Union Budget on February 1, 2025, individual taxpayers are expressing several key expectations aimed at enhancing their financial well-being and simplifying the tax framework.
1. Reduction in Personal Income Tax Rates
A significant portion of taxpayers is advocating for lower personal income tax rates to increase disposable income. According to a pre-budget survey by Grant Thornton Bharat, 57% of respondents favor reduced tax rates, while 25% support higher exemption thresholds.
2. Enhancement of Standard Deduction
Taxpayers are calling for an increase in the standard deduction to better align with rising living costs. The current standard deduction stands at ₹50,000 under the old tax regime and ₹75,000 under the new regime. There is a demand to double these amounts to ₹1 lakh and ₹1.5 lakh, respectively.
3. Increase in Income Tax Exemption Limit
Raising the basic exemption limit is a recurring demand. Currently, the exemption limit is ₹3 lakh under the new tax regime and ₹2.5 lakh under the old regime. Taxpayers are seeking an increase in the exemption limit to ₹5 lakh for both regimes. Additionally, there is a call to reduce the number of tax slabs in the new regime and raise the taxable income threshold from ₹7 lakh to ₹10 lakh.
4. Higher Deduction under Section 80C
For those adhering to the old tax regime, there’s an expectation to raise the deduction limit under Section 80C from the current ₹1.5 lakh to ₹3 lakh. This adjustment would encourage greater savings and investment among taxpayers.
5. Increased Deduction for National Pension Scheme (NPS) under Section 80CCD(1B)
Given the absence of a comprehensive social security system, taxpayers are urging an increase in the deduction limit for contributions to the NPS under Section 80CCD(1B) from ₹50,000 to ₹1 lakh. This move would promote retirement savings and potentially expand the NPS subscriber base.
6. Addressing Double Taxation of Dividends
There is a concern regarding the double taxation of dividends, where companies pay taxes on profits, and shareholders are subsequently taxed on the dividends received. Taxpayers are advocating for the abolition of this double taxation to alleviate the tax burden.
7. Housing-Related Tax Benefits
Taxpayers are requesting that the House Rent Allowance (HRA) exemption and the deduction of interest on home loans under Section 24(b) be extended to self-occupied properties in the new tax regime. This change would provide significant relief to homeowners.
8. Simplification of Tax Deducted at Source (TDS) Rates
To reduce compliance burdens, there is a call for the simplification of the multiple TDS rates currently in place. Streamlining these rates would make the tax system more user-friendly and efficient.
9. Reduction in Interest for Delay or Default in Tax Payments
Taxpayers are also seeking a reduction in the interest rates charged for delays or defaults in filing returns or paying advance tax, aiming to lessen the financial strain in such situations.
These expectations reflect a collective desire among taxpayers for a more equitable, simplified, and supportive tax environment that accommodates the evolving economic landscape.
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