SOURCE : BUSINESS TODAY | PUBLISHED : 9 JAN 2025
Budget wishlist: Stakeholders, including taxpayers and businesses, are eagerly waiting for the presentation of Finance Minister Nirmala Sitharaman’s eighth budget on February 1, 2025. The focus will be on key announcements and the government’s economic vision for Prime Minister Modi’s third term. EY India has recommended in its wishlist to the FM that the budget for 2025 should prioritise increasing capital expenditure, lowering the debt-to-GDP ratio, enhancing tax exemptions, and implementing various other measures.
In its Budget anticipation note, EY India stated that it is expecting significant reforms geared towards streamlining the tax system, enhancing taxpayer services, reducing litigation, and improving compliance, along with measures to address the longstanding backlog of tax disputes.
The firm also proposed enhancing the attractiveness of dispute prevention mechanisms, such as safe harbours, to minimise future conflicts. Currently, over Rs 31 lakh crore is locked in unresolved income tax cases, equivalent to 9.6% of India’s GDP for 2023-24, which burdens the taxation framework. EY underscored the importance of fiscal consolidation, tax system simplification, and investment-driven growth to establish a robust foundation for sustained economic progress.
“While a full comprehensive review of the direct tax code may take time, we might see some initial steps towards its implementation in this Budget. I also hope for a reduction in personal income tax, particularly for the lower-income groups, to provide relief and stimulate demand,” said Sameer Gupta, National Tax Leader, EY India.
Streamlining I-T laws
EY foresees substantial changes in the tax system aimed at simplifying processes for taxpayers, minimising disputes, and promoting compliance. The government is currently streamlining Income Tax laws, and EY recommends a collaborative approach by seeking feedback from the public on proposed changes. EY also suggests key priorities such as boosting public investment, curbing fiscal deficits, encouraging private sector investments, and implementing targeted tax reforms to stimulate business innovation.
Capital gains tax
According to EY, the government made adjustments to the capital gains structure in the previous Budget by considering the holding period of assets and tax rates. EY suggests that the government may need to address some unintended anomalies to fully complete the rationalisation of capital gains.
One example mentioned is potentially reducing the holding period for capital assets, such as business undertakings in slump sales, from 36 months to 24 months. Additionally, the holding period for unlisted shares in IPO offer for sale (OFS) may be decreased from 2 years to 1 year to align with listed securities.
Postponing TDS
Postponing the deduction of tax at source (TDS) on provident fund (PF) interest (above Rs 2.5 lakh) until the withdrawal stage to simplify compliance requirements. Additionally, consolidating the TDS rate structure into 3-4 broader categories with reduced rates and a clearly defined negative list. Further enhancements include extending ESOP tax deferment benefits to all employers.
Limit on Property and HRA
Eliminating the limitation on the adjustment of house property losses against other sources of income. With regards to House Rent Allowance (HRA), proposing a 50% exemption in tier-2 cities such as Hyderabad, Pune, Bengaluru, and Ahmedabad, for tax consistency. Presently, only four metro cities benefit from a 50% HRA exemption.
Regulation of Digital Assets
Establishing more detailed directives on the taxation of digital assets like cryptocurrency and non-fungible tokens (NFT). Including a provision for offsetting losses in digital assets.
SOURCE : BUSINESS TODAY | PUBLISHED : 9 JAN 2025
