Budget 2025: Individual tax reforms – What to expect for individual taxpayers – CNBC TV18

The current tax structure under the simplified tax regime consists of multiple brackets ranging from 5% to 30%, which adds complexity and administrative burden. Officials are expected to focus on refining this new system by consolidating tax rates into broader categories. A practical approach would be to reduce the number of tax slabs to three – 10%, 20%, and 30% – eliminating intermediate rates and slabs. This reorientation will simplify tax planning and compliance for taxpayers of different income levels, making the new regime more attractive.

Additionally, the standard deduction is also expected to be increased to ease the burden of rising cost of living. 150,000 from current 75,000, provides relief to taxpayers by allowing them to set off everyday expenses against taxable income. Introduction of Leave Travel Allowance under the simplified regime can make the regime more attractive and also give a boost to the domestic travel industry. The increasing trend of focus on the new system versus the old system clearly indicates that no further tinkering can be seen in the much-awaited Chapter VI-A deductions.

In response to the financial challenges faced by senior citizens, especially inflation and rising health care costs, policymakers should ideally consider adjusting the slab rates under the new regime by increasing the basic exemption limit. from 300,000 700,000 for senior citizens. The purpose of this adjustment is to reduce the tax liability for elderly taxpayers who have limited income sources.

Additionally, increasing the standard deduction for senior citizens 200,000, above current 75,000, can help offset the medical benefits and fixed deposit deductions available under Chapter VIA in the old regime.

Beyond these general reforms, individual taxpayers face unique challenges in their compliance processes, which also need to be addressed in the upcoming Budget. One such area involves TDS compliance for property transactions with non-resident sellers compared to resident sellers. Currently, in case of purchasing a property from a resident seller, the home buyer is required to withhold tax deducted at source (TDS) where the value of the property is 50 lakh or more.

The process of depositing TDS in such a case is simple and convenient, wherein TDS can be deposited using the PAN of the buyer through challan-cum-statement in Form No. 26QB. However, in case of purchase of property from a non-resident seller, resident buyers are required to obtain a Tax Deduction Account Number (TAN) and pay taxes using the said TAN. Additionally, the buyer will also be required to file a complex e-TDS return. Although purchase and sale of property is not a recurring transaction, obtaining TAN only for the mentioned purpose may lead to more inactive TANs in the future.

Simplifying this requirement, perhaps by using invoice-cum-details and PAN of the buyer in case of transactions with resident sellers, would reduce the compliance burden on buyers in such transactions.

The process of e-verification also presents challenges, as it is currently limited to Indian mobile numbers. Extending this facility to overseas mobile numbers will streamline the filing process for non-residents, ensuring that they can verify their returns efficiently without any delay. Similarly, direct credit of tax refunds into foreign bank accounts will resolve the difficulties faced by non-residents who no longer hold Indian bank accounts.

As Budget day approaches, taxpayers are looking forward to reforms that will simplify the tax process, provide greater financial relief and cater to the unique needs of non-resident taxpayers. Streamlining compliance, especially for property transactions, tax payments and refunds, and increasing exemptions for middle class taxpayers are being considered important. By focusing on fairness and transparency, the government can promote greater tax compliance and create an efficient tax system conducive to long-term economic growth.

-Author; Nitin Baijal, Sahil Bhasin and Kajal Gupta are Executive Director, Associate Director and Manager of Deloitte Haskins and Sells CA LLP respectively. The views expressed are his personal.