Tax Changes In Union Budget 2025: Tax Relief For The Salaried Class & NRIs?

Summary

As Budget 2025 approaches, salaried individuals are hopeful for significant income tax relief. The government introduced a simplified tax regime in 2022, and while tweaks were made in 2023, the old system remained unchanged. Economists are pushing for lower taxes to boost disposable income and stimulate economic growth. Predictions suggest that the upcoming budget may adjust tax slabs and rates for incomes up to ₹10 lakh. There are also proposals to ease tax compliance for Non-Resident Indians (NRIs), including allowing tax payments from overseas accounts and facilitating refunds to foreign bank accounts. Will Budget 2025 bring the relief taxpayers expect?

Takeaways

• 😀 Budget 2025 is approaching, and there is growing speculation about potential income tax relief for salaried individuals.
• 😀 The Union Budget for FY 2021 introduced an optional income tax regime with lower tax rates but fewer deductions.
• 😀 In the 2023 Budget, Finance Minister Nirmala Sitharaman made adjustments to the new tax regime, increasing the standard deduction and expanding tax slabs.
• 😀 The standard deduction is a fixed amount that can be subtracted from taxable salary to help with work-related expenses.
• 😀 The standard deduction was previously scrapped in 2005 but reinstated in 2018 at 40,000, and has gradually increased since then.
• 😀 Economists are urging for income tax cuts in Budget 2025 to increase disposable income, stimulate economic growth, and encourage savings and spending.
• 😀 Experts suggested reducing tax rates for incomes up to 10 lakh in Budget 2025 to boost disposable income.
• 😀 The new tax regime is the default for taxpayers, with 72% having shifted to it, and it offers fewer deductions and exemptions compared to the old regime.
• 😀 There is a push to simplify tax compliance for NRIs (non-resident Indians), including streamlining property transactions and tax payments from overseas bank accounts.
• 😀 Key suggestions for NRIs include improving e-verification, extending OTP options for foreign mobile numbers, and facilitating tax refunds to foreign accounts.

Q & A

What is the significance of the 2021 Union Budget regarding income tax?

The 2021 Union Budget introduced an optional personal income tax regime with lower tax rates but fewer deductions. This change forced taxpayers to choose between the old system with deductions and the new, simplified one.

What changes were made in the 2023 Union Budget related to income tax?

In the 2023 Union Budget, Finance Minister Nirmala Sitharaman made adjustments to the new tax regime, including expanding two income tax slabs and increasing the standard deduction from ₹50,000 to ₹75,000. However, the old tax regime was not modified.

What is a standard deduction, and why is it important?

A standard deduction is a fixed amount that can be subtracted from a person's taxable salary to account for work-related expenses. It helps reduce the taxable income and is crucial in providing tax relief to individuals, especially amid rising living costs.

When was the standard deduction scrapped, and when did it return?

The standard deduction was scrapped in 2005 but made a comeback in 2018, initially set at ₹40,000 and has since been increased over the years.

What do economists suggest for Budget 2025 in terms of tax relief?

Economists are calling for a reduction in income tax rates in Budget 2025 to increase disposable income. Lower taxes could encourage savings, boost spending on essentials, and revive demand in sectors affected by sluggish consumption.

How might Budget 2025 address income tax slabs and rates?

The upcoming Budget 2025 may introduce modifications to the new tax regime, including adjusting personal income tax slabs and reducing tax rates for incomes up to ₹10 lakh, to enhance disposable income.

What is the current tax structure under the new tax regime?

Under the new tax regime, income up to ₹3 lakh is tax-free, with progressive tax rates ranging from 5% to 30% for higher income brackets. This system also offers fewer exemptions and deductions compared to the old regime.

What changes are being proposed for NRIs (Non-Resident Indians) in the upcoming budget?

Several suggestions have been made to simplify tax compliance for NRIs. These include streamlining property transactions, enabling tax payments from overseas bank accounts, extending OTP options for e-verification to foreign mobile numbers, and facilitating tax refunds to overseas bank accounts.

What challenges do NRIs currently face regarding tax compliance?

NRIs currently face challenges such as withholding tax at a higher rate for property transactions, the necessity to use Indian banks for tax payments, limited OTP options for e-verification, and issues with receiving tax refunds in foreign bank accounts.

Will Budget 2025 bring major changes to the old tax regime?

It is uncertain whether Budget 2025 will bring significant changes to the old tax regime, as the new regime was made more attractive in the 2023 Budget. However, expectations are high for potential reforms and adjustments.