As India’s Finance Minister, Nirmala Sitharaman, prepares to present the Union Budget on February 1, 2025, taxpayers eagerly await news on potential tax changes, especially those that could provide relief for the commoner. The income tax segment of the budget is always keenly anticipated, with many speculating about whether adjustments to the tax slabs will be made or new measures introduced to ease the tax burden.
Budget 2025: What’s Expected
The Central Board of Direct Taxes (CBDT) has reportedly conducted extensive reviews to simplify tax laws, creating anticipation for reforms that will streamline the taxation process and bolster taxpayer confidence. 
While a complete overhaul of the Income Tax Act is not expected, experts foresee measures focused on simplifying compliance and expediting the resolution of disputes. Ashish Agrawal, Partner at Dhruva Advisors, highlighted concerns over slow disposal rates at Faceless CIT(Appeals) levels and emphasized that addressing this backlog could significantly ease the process for taxpayers. Agrawal also called for simplifying the provisions for Tax Deducted at Source (TDS) and Tax Collected at Source (TCS) by reducing complexity and multiple rates. Another key proposal is extending the 15% concessional corporate tax rate under the Make-in-India initiative beyond March 2024, which could spur private investments, job creation, and exports.
For foreign taxpayers, Agrawal suggests enabling direct tax payments and refund claims through overseas bank accounts via the e-filing portal, thus eliminating the need for Indian bank accounts.
Proposals for Senior Citizens
Sudhir Kaushik, CEO of Taxspanner, has recommended lowering the age for senior citizens’ tax filing exemptions from 75 to 70 years. He also proposed ensuring better compliance from mandatory tax filers.
Meanwhile, CA Anand Bathiya, President of the Bombay Chartered Accountants’ Society, downplayed expectations for significant policy changes, emphasizing that the budget will likely focus on procedural tweaks rather than major shifts.
Budget 2025: Anticipated Tax Reforms
Tax expert Shefali Mundra of ClearTax also offered insights into possible changes. Among her expectations:
- Section 80D Deductions: To encourage more investments in health insurance, the limit for individual taxpayers will be increased to Rs 50,000 and Rs 1,00,000 for senior citizens.
- Home Loan Deductions: Raising the ceiling under Section 24(b) from Rs 2 lakh to Rs 3 lakh to promote housing sector investment.
- Revised Section 80C Limit: Updating the existing Rs 1.5 lakh cap to foster investment in tax-saving instruments like the Public Provident Fund (PPF) and fixed deposits.
- Corporate Tax Incentives: Extending the concessional 15% corporate tax rate beyond March 2024 to support the Make-in-India initiative.
- Research & Development Incentives: Introducing production-linked incentives tied to factors like turnover growth or capital investment.
Agrawal has also suggested offering senior citizens higher exemption limits and aligning individual and Limited Liability Partnership (LLP) tax rates to the 25% corporate tax rate.
Revised Tax Slabs: A Point of Debate
One major point of discussion concerns the potential revision of tax slabs. Agrawal believes the tax-free threshold should be increased to Rs 10 lakh, with new progressive tax rates of 10% for income between Rs 10-20 lakh, 20% for Rs 20-30 lakh, and 30% for income above Rs 30 lakh. These changes could offset the impact of inflation on disposable income.
In contrast, Sudhir Kaushik underscores the importance of maintaining stability in the tax system. He argues that frequent changes can create uncertainty for taxpayers and hinder their ability to plan financially in the long term.
CA Anand Bathiya also supports easing personal taxes, suggesting that higher disposable incomes could boost consumption and fuel economic growth.
Conversely, Mundra anticipates that the basic tax exemption limit could be raised from Rs 3 lakh to Rs 5 lakh. This adjustment would significantly benefit those earning Rs 15 lakh annually, with the tax calculation reflecting this proposed change and a standard deduction of Rs 75,000.
With Budget 2025 just around the corner, the nation will watch closely to see if these anticipated changes are incorporated into the final plan.
