Budget 2025-26: Individual Taxpayers Urge FM Sitharaman for Tax Rate Reductions
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Synopsis
A recent pre-budget survey indicates that individual taxpayers are urging Finance Minister Nirmala Sitharaman to provide tax relief in Budget 2025-26, with a strong demand for lower tax rates and higher exemption limits to boost disposable income.
Key Takeaways
- 57% of taxpayers favor lower tax rates.
- 72% of taxpayers have adopted the new tax regime.
- 46% want reduced tax rates in the new regime.
- 63% seek more incentives under the old tax system.
- 38% desire tax payments through foreign banks.
New Delhi, Jan 26 (NationPress) A pre-budget survey has uncovered that individual taxpayers are seeking tax relief on the personal tax landscape to enhance their disposable income in the upcoming Budget 2025-26, which Finance Minister Nirmala Sitharaman is set to present in Parliament on February 1.
A substantial portion of participants, accounting for 57 percent, are in favor of lower tax rates, while 25 percent advocate for an increase in exemption limits, according to the recent survey conducted by Grant Thornton Bharat, a consulting and services firm.
Latest statistics show that a considerable number of taxpayers have transitioned to the simplified new personal (default) tax regime. Currently, 72 percent have chosen this option, leaving only 28 percent under the old tax system.
To further enhance the attractiveness of the new tax regime, roughly 46 percent of respondents suggest a reduction in tax rates, and 26 percent believe in increasing exemption limits, as highlighted by the survey.
Despite indications from the government regarding the potential phasing out of the old tax regime, 63 percent of taxpayers still desire greater incentives under this system, according to the findings.
As digitalization transforms financial processes, taxpayers are increasingly demanding a more efficient tax filing and compliance system. Grant Thornton Bharat’s pre-budget survey reveals that 38 percent of respondents would prefer the ability to make tax payments through foreign banks, which would simplify compliance for NRIs. Additionally, there is a call for improved operational mechanisms for tax refunds to overseas banks and the utilization of e-verification through OTPs sent to foreign mobile numbers for expatriates.
Regarding domestic tax compliance, 56 percent of participants wish for an increased income threshold for tax filing to alleviate the burden of tax return filing on small taxpayers. Furthermore, 32 percent are requesting a reduction in the additional tax imposed on updated tax returns, while 12 percent are in favor of extending the timeline for filing revised Income Tax Returns (ITRs). These insights indicate taxpayer desires for changes that would streamline tax compliance, particularly for those residing abroad.
What modifications should the government implement in the Union Budget 2025-26 to enhance tax return filing compliance?
A notable 53 percent of taxpayers are advocating for more flexible withdrawal regulations and higher tax exemptions under the National Pension Scheme (NPS) for premature withdrawals or annuity payouts. Such adjustments would enhance the NPS’s appeal, thereby promoting greater participation and ensuring financial security for individuals in the long term.
The survey also points out that taxpayers are seeking the reintroduction of tax incentives to encourage the adoption of electric vehicles (EVs). The implementation of these measures would promote broader EV usage.
Previously, the government offered tax deductions for interest paid on loans used to purchase electric vehicles (EVs). This exemption is applicable only for loans sanctioned between April 1, 2019, and March 31, 2023.
