As the countdown begins for India’s Union Budget announcement on February 1, 2025, excitement mounts among taxpayers, particularly regarding potential updates to income tax policies. Many are hoping for significant relief measures that could alleviate the financial burden on ordinary citizens. With discussions about revising tax slabs and introducing new relief initiatives buzzing in the air, clarity on the government’s direction is eagerly anticipated.
What to Expect from India’s Budget 2025?
The Central Board of Direct Taxes is currently engaged in a comprehensive evaluation of the country’s tax laws, seeking to simplify and enhance compliance processes. This preparatory work raises expectations for reforms aimed at building taxpayer trust and improving compliance mechanisms across the board.
According to Ashish Agrawal, Partner at Dhruva Advisors, while a complete overhaul of the Income Tax Act seems unlikely this year, initiatives focused on streamlining compliance and expediting dispute resolution are within the realm of possibility. He highlights the slow disposal rates in Faceless CIT(Appeals) in recent years, suggesting that addressing this could significantly improve the ease of doing business in India.
Agrawal also advocates for the simplification of provisions related to Tax Deducted at Source (TDS) and Tax Collected at Source (TCS), recommending a reduction in complexity surrounding varying rates. He proposes extending the 15% concessional corporate tax rate associated with the Make-in-India initiative, which is set to expire on March 31, 2024, for an additional five years to encourage private investment, job creation, and exports. Furthermore, he suggests facilitating direct tax payments and refunds for foreign taxpayers through overseas bank accounts via an e-filing portal, eliminating the need for Indian bank accounts.
The Tax Slab Debate: What’s on the Table?
A lively debate surrounds the revision of tax slabs in India. Agrawal advocates for reassessing the current structure, proposing a significant increase in the tax-free threshold to ₹10 lakh. His model suggests progressive tax rates:
- 10% for incomes between ₹10–20 lakh
- 20% for ₹20–30 lakh
- 30% for incomes exceeding ₹30 lakh
Agrawal believes this adjustment would ease financial pressures on taxpayers grappling with rising costs and significant tax liabilities.
Conversely, Kaushik stresses the importance of stability in tax policies, arguing that consistency helps taxpayers plan for the long term. Bathiya supports the idea of reducing high personal tax rates, suggesting it could enhance disposable income for the middle class, thereby boosting consumption and stimulating economic growth. Mundra, meanwhile, anticipates Finance Minister Sitharaman might raise the basic tax exemption limit from ₹3 lakh to ₹5 lakh, simplifying tax calculations for individuals.
Below is a comparison of the current and proposed tax slabs for clarity:
| ax Slab | Current Tax Rate | Current Tax Payable | Proposed Tax Rate | Proposed Tax Payable |
| Up to ₹3 lakh | Nil | Nil | Nil | Nil |
| ₹3–7 lakh | 5% | ₹20,000 | 5% | ₹10,000 |
| ₹7–10 lakh | 10% | ₹30,000 | 10% | ₹30,000 |
| ₹10–12 lakh | 15% | ₹30,000 | 15% | ₹30,000 |
| ₹12–15 lakh | 20% | ₹60,000 | 20% | ₹60,000 |
| Total Tax Payable | ₹1,40,000 | ₹1,30,000 |
the anticipation surrounding potential tax changes is palpable among taxpayers and financial analysts alike. These measures could not only reshape financial strategies but also contribute significantly to the country’s economic landscape. For more insights on India’s budget in 2025, check out our article on India Set to Simplify Income Tax Filing.
