– By Divya Baweja and Amanpreet Kaur
With the Union Budget 2025 round the corner, individual taxpayers in India are looking forward to key reforms that will simplify the tax process, offer enhanced relief and promote greater transparency within the taxation system.
As the simplified tax regime gains popularity over the old tax regime, there is a heightened focus on refining the tax structure to ease the compliance burden. Several important reform proposals are anticipated to take priority in the upcoming Budget.
One of the most significant expectations is further relief for taxpayers opting for the new tax regime. It is widely anticipated that the government will increase the basic exemption limit from Rs 3 lakh to Rs 5 lakh. In addition, a reduction in the highest tax rate from 30% to 25% is expected, providing substantial relief for taxpayers in higher income brackets. Furthermore, it is also expected that the standard deduction will be increased from Rs 75,000 to Rs 100,000, offering greater relief and thereby allowing taxpayers to offset everyday expenses against their taxable incomes.
Given the focus of the government to promote electric vehicles, it is time to bring in the valuation norms for electric vehicles. Higher concessions for electric vehicles could be a welcome move.
The current deadline for filing revised or belated tax returns is set to December 31, which often presents challenges for globally mobile individuals seeking to claim tax relief such as foreign tax credits (FTC). As many overseas jurisdictions follow the calendar year, extending the deadline for filing revised returns from 31 December to 31 March, would allow such taxpayers to claim appropriate relief.
In so far as simplification of process is concerned a key issue that requires attention is the e-verification process for Non-Residents. Presently, e-verification of tax returns relies on one-time passwords (OTPs) sent to Indian mobile numbers. This poses challenges for Non-Residents, particularly those who have moved abroad and no longer use Indian phone numbers. Expanding the e-verification system to include foreign mobile numbers, or implementing two-factor authentication with OTPs sent to both foreign mobile numbers and email addresses would create a more efficient and accessible process for non-residents.
Another key area that requires attention is the simplification of the Tax Deducted at Source (TDS) process for property transactions and rental payments involving non-resident individuals. Currently, homebuyers need to withhold 1% TDS on property transactions exceeding Rs 50 lakhs. When the seller is a resident, the process is straightforward. However, if the seller is a Non-Resident Indian (NRI), the buyer needs to obtain a Tax Deduction Account Number (TAN), deposit the withheld tax and file e-TDS returns. To simplify this, the government could look at allowing buyers to use the same PAN-based system for NRI sellers as used for resident sellers, thereby, eliminating the need for TAN and additional filings, thus, making the process simpler.
Further, to simplify the process for Non-Residents, it is time that the refund and tax payments be processed through overseas bank accounts. As Budget 2025 approaches all eyes are on the Hon’ble Finance Minister to see how the expectations of individual taxpayers are met.
(Divya Baweja is Partner at Deloitte India; and Amanpreet Kaur is Associate Director at Deloitte India.)
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