As the Union Budget 2025-26 approaches, tax experts and stakeholders are urging the government to address key concerns of the salaried class and Micro, Small, and Medium Enterprises (MSMEs) to drive consumption, investment, and economic growth.
Reducing Tax and Compliance Burden
Experts emphasize the need for easing the tax and compliance burden on salaried individuals. "Inflation continues to erode disposable income for the salaried class, leaving them burdened by cumbersome Income Tax Return (ITR) filing processes," a tax expert stated. Suggestions include:
- Increasing the basic exemption limit: Raising it to ₹10 lakh from the current levels to provide greater relief to taxpayers.
- Enhancing the standard deduction: Further increasing the deduction to put more cash in the hands of taxpayers, thereby boosting consumption.
Simplifying ITR and Rationalizing Capital Gains Tax
Simplification of ITR forms remains a key demand, as the current process is seen as complex for individuals and smaller businesses. Experts are also advocating for further rationalization of capital gains tax structures and thresholds for Tax Deducted at Source (TDS), which will encourage investments across sectors.
Focus on MSMEs and the Manufacturing Sector
MSMEs, which account for 98% of manufacturing activities in India, require special attention. Industry leaders propose:
- Lowering the taxation rate for MSMEs below a specified revenue threshold.
- Offering concessional tax rates specifically for the manufacturing sector to encourage growth.
- Allowing MSMEs to adopt presumptive taxation for simplified compliance, reducing the need to maintain detailed records and balance sheets.
Corporate Tax Rationalization for New-Age Businesses
The corporate sector also seeks relief, particularly in emerging industries like electric vehicles (EVs), semiconductors, and data centres. Recommendations include:
- Introducing lower tax rates for these industries to promote innovation and investment.
- Expanding presumptive taxation to small and medium enterprises for ease of doing business.
Current Tax Regime Overview
The existing tax structure offers two regimes:
- New Tax Regime: Exempts income up to ₹3 lakh, with a progressive tax rate up to 30% for income above ₹15 lakh.
- Old Tax Regime: Exempts income up to ₹2.5 lakh and offers deductions and exemptions, with rates reaching 30% for income above ₹10 lakh.
Under the 2024-25 Budget, the government increased the standard deduction for salaried taxpayers to ₹75,000 and the family pension deduction for pensioners to ₹25,000 under the new tax regime.
Encouraging Private Investment
To stimulate private sector investment, tax experts argue for policies that create a more conducive environment for businesses, including rationalizing tax rates and compliance requirements.
As the government prepares to unveil the 2025-26 Budget, it remains to be seen how these suggestions will translate into policies that address the needs of taxpayers while fostering economic growth.
This Budget could mark a pivotal step in ensuring financial inclusivity and supporting India's aspirations of becoming a $5 trillion economy.
CAclubindia
