Deduction Limit Boost
One of the key expectations is a potential revision of the deduction limit under Section 80C. This section allows taxpayers to claim deductions for various
investments and expenses, such as contributions to the Employees' Provident Fund (EPF), life insurance premiums, and investments in tax-saving schemes. Currently, the maximum deduction allowed under Section 80C is Rs 1.5 lakh. There's anticipation that the government may consider increasing this limit to provide taxpayers with more avenues for tax savings and encourage long-term investments. Such a change would offer individuals greater flexibility in financial planning and potentially boost investment in eligible instruments.
Equity Gains Rebate
Another significant proposal involves extending the rebate under Section 87A to equity capital gains. Section 87A provides a tax rebate to individuals with a total income below a certain threshold, effectively reducing their tax liability. Currently, this rebate applies to the total income, including salary and other sources, but not specifically to capital gains from equity investments. Expanding this rebate to include equity gains could incentivize investment in the stock market, especially for those with lower incomes. This move may also make equity investments more attractive, fostering a culture of financial investment among a broader segment of the population.
Fixed Income Tax
Tax rationalization in fixed income is a key area of focus for the upcoming financial year. This involves reviewing and potentially revising the tax treatment of various fixed-income instruments like fixed deposits, bonds, and other debt instruments. The aim is to create a more equitable and transparent tax regime, potentially reducing tax complexities and providing clarity to investors. Rationalization could involve changes in tax rates, the introduction of new tax slabs, or adjustments in how income from fixed-income investments is calculated and taxed. These changes would help create a more favorable environment for fixed income investments.
Income Tax Slabs: Review
The income tax slabs for the financial year 2025-26 are expected to be reviewed. This review will likely consider the existing tax slabs under both the old and new tax regimes. The government may evaluate the current tax rates and slabs to make them more aligned with the economic conditions and income levels of the population. This could lead to adjustments in the tax brackets, potentially offering relief to taxpayers by lowering tax rates or adjusting income thresholds. The goal is to ensure the tax system remains progressive, ensuring that those with higher incomes contribute a larger share, while also providing tax benefits to low-income individuals.
Home Loan Benefits
A proposal includes allowing home loan and house property benefits under the new tax regime. Currently, the new tax regime, which offers lower tax rates, does not permit claiming deductions for home loan interest or house property-related expenses. The expectation is that the government might make adjustments to allow these deductions under the new regime. This change would make the new tax regime more appealing to those with home loans or property-related expenses, thus encouraging homeownership and offering greater financial flexibility to taxpayers. The inclusion of these benefits could make the new regime a viable choice for a wider range of taxpayers.
ITR Due Dates Clarity
Bringing certainty to ITR (Income Tax Return) due dates is another crucial aspect of the proposed changes. There are calls for greater clarity and predictability regarding the deadlines for filing income tax returns. Clear and consistent due dates reduce confusion among taxpayers, ensuring timely compliance and preventing penalties. Precise due dates also assist the tax authorities in effectively managing tax collections. This move emphasizes a focus on simplifying tax compliance procedures and ensuring a smooth and efficient filing process for all taxpayers.
Focus on NRIs
Focused attention on Non-Resident Indians (NRIs) forms another part of the budget's goals. This may involve specific measures to address the unique tax-related challenges faced by NRIs. The government may also explore ways to streamline the tax filing process for NRIs, making it easier for them to comply with Indian tax regulations. Such measures could include simplifying documentation, offering better online support, or implementing specific tax incentives. This focus acknowledges the significant economic contribution of NRIs and aims to facilitate their financial engagements with India.
New Regime Slabs
Income tax slabs for FY 2025-26 (AY 2026-27) under the new tax regime are expected to be thoroughly examined. These slabs, which specify the tax rates applicable to different income levels, are designed to make the new tax regime competitive and attractive to taxpayers. The review might consider how well the existing slabs reflect the current economic realities and propose changes to improve their effectiveness. Such revisions might include adjusting tax rates, adding or removing tax brackets, or modifying the income thresholds associated with each tax slab. This is done to make the tax system more equitable and simplify it for taxpayers.
Old Regime Slabs
The existing income tax slabs for individuals below 60 years, NRIs, and Hindu Undivided Families (HUFs) under the old tax regime will also be reviewed. The old tax regime offers various deductions and exemptions, such as those under Section 80C. The government could assess whether the existing slabs under the old regime remain competitive or if adjustments are necessary to encourage tax compliance and ensure the regime remains relevant. Reviewing the old regime will require evaluating the tax rates and income thresholds to see if they align with economic conditions and taxpayers' expectations.
Standard Deduction Increase
There's a proposal to increase the standard deduction to Rs 75,000. The standard deduction, available to salaried individuals and pensioners, is a fixed amount deducted from gross total income before calculating taxable income. Increasing this deduction would effectively lower the taxable income, leading to reduced tax liability. This change will provide additional financial relief to a wide range of taxpayers and potentially boost consumer spending. The impact of the increased standard deduction would be particularly beneficial for those with modest incomes.
