With Union Budget 2025-26 fast approaching, individual taxpayers are looking for relief on the personal tax front to boost their disposable income. As Finance Minister Nirmala Sitharaman prepares to present the budget on February 1, a pre-budget survey reveals strong calls for income tax rate cuts and increased exemptions.
Key Findings from the Pre-Budget Survey
A survey conducted by consulting firm Grant Thornton Bharat shows that 57% of respondents are pushing for lower income tax rates, while 25% are advocating for higher exemption limits. These results highlight a growing desire for more tax relief across the board.
Interestingly, a significant 72% of taxpayers have opted for the new, simplified tax regime, leaving just 28% in the older tax system. However, even with the shift to the new regime, a considerable portion of taxpayers is still calling for further tax cuts. 46% of respondents suggest that lowering tax rates could make the new regime more attractive, while 26% believe increasing exemption limits would help ease financial burdens.
The Old Tax Regime: Calls for More Incentives
Despite the government’s hints that the old tax regime could eventually be phased out, 63% of taxpayers still want more incentives under the old tax system, according to the survey. This shows a strong preference for maintaining the old structure, even as the newer tax regime gains popularity.
Tax Compliance and Digitalisation
As financial processes continue to evolve, the demand for more efficient tax filing systems is growing. A notable 38% of respondents support the idea of enabling tax payments through foreign banks to facilitate easier compliance for NRIs. This move would simplify the tax process for Indian citizens living abroad, allowing them to comply more easily with tax regulations.
Additionally, tax refunds to overseas banks and the use of e-verification with OTPs for foreign mobile numbers are other features taxpayers believe should be prioritized to improve the system for NRIs.
Simplifying Domestic Tax Filing
On the domestic front, taxpayers are calling for changes that would reduce the filing burden, particularly for small taxpayers. 56% of respondents support an increase in the income threshold for filing tax returns, which would reduce the number of people required to file. Meanwhile, 32% are in favor of a reduction in the additional tax applicable when filing updated tax returns, and 12% would like an extension in the deadline for filing revised Income Tax Returns (ITRs).
NPS and Electric Vehicle Tax Benefits: What’s on the Table?
The survey also touches on reforms aimed at encouraging long-term savings and promoting environmentally friendly choices. 53% of respondents are calling for more flexible withdrawal rules and higher tax exemptions under the National Pension Scheme (NPS) for premature withdrawals or annuity payouts. This would make NPS more appealing, encouraging greater participation and helping individuals secure their financial futures.
Moreover, there’s growing interest in reintroducing tax incentives for electric vehicle (EV) adoption. Tax deductions previously offered for loans taken to purchase electric vehicles expired on March 31, 2023, but there is strong demand for the government to reinstate such incentives. This could play a pivotal role in accelerating the transition to EVs and reducing the nation’s carbon footprint.
The Road Ahead
As the Union Budget approaches, it’s clear that taxpayers are looking for tangible changes that will ease their financial burdens and simplify compliance. Whether it’s through lower tax rates, higher exemptions, or more flexible savings and investment options, the government faces mounting pressure to deliver relief.
Taxpayers, particularly those abroad, are also hoping for more streamlined systems to make tax filing and payments easier, a sign that digitalisation must play a larger role in tax policy moving forward.
The big question now is: will FM Nirmala Sitharaman’s Budget address these concerns and deliver the much-needed tax relief for millions of Indians? Keep an eye out for the upcoming announcements on February 1, 2025, as they could reshape the personal tax landscape for the years to come.
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