Budget 2025- Expectations

In discussion with ET correspondent, CA Jigar Suba quoted following points for Pre-Budget Expectations-

“How can the government increase disposable income for individual taxpayers?

To enhance disposable income and stimulate consumption, the government could consider the following tax reforms aimed at benefiting individual taxpayers:

1. Adjust House Rent Allowance (HRA) Deductions: Aligning HRA deductions with rising urban rent costs would help individuals manage their housing expenses more effectively.
2. Exempt Tax on Interest Receipt from Fixed Deposits: Given that post-tax returns on fixed deposits are often below inflation rates, exempting interest income upto a certain limit from tax would encourage savings and strengthen financial security.
3. Raise Rebate Limit Under Section 87A: Increasing the rebate limit to INR 10 lakh would provide immediate tax relief to middle-class taxpayers, boosting their disposable income.
4. Reduce Highest Surcharge Rate to 25%: Capping the highest surcharge at 25%, instead of the current 37%, would reduce the tax burden on high-income earners, thereby increasing their purchasing power.
5. Increase Standard Deduction for Salaried Individuals: Raising the standard deduction to ₹1.50 lakh would provide significant relief to the salaried class, especially given the limited deductions available under the current tax regime.
6. Increase Home Loan Interest Deductions: Raising deduction limits for first-time or single homebuyers would alleviate the financial burden of home loan interest, particularly in high-cost cities like Mumbai.”

“Income Tax Reforms to Boost Homeownership

“To support the government’s “Housing for All” initiative, tax reforms are essential to ease the financial burden on first-time homebuyers. Under the new tax regime, there is currently no deduction for interest on home loans for self-occupied properties, making homeownership challenging, especially in cities like Mumbai, where average home prices exceed Rs 1 crore. Allowing home loan interest deductions and increasing limits can make housing more affordable and stimulate economic growth.””

Income Tax benefits to professionals and small business owners

“Under Section 194T in Budget 2024, TDS on remuneration paid to partners is stipulated to be paid at 10%. Critics argue for a reduction in the proposed TDS rate from the present 10% to 1% to mitigate its impact on working capital for partnership firms and LLPs.“

“Furthermore, there is growing support for lowering the tax rate for partnership firms from 30% to 22%, in line with broader corporate tax reductions. These adjustments would significantly improve liquidity, ease compliance, and encourage business growth, particularly for smaller firms. With these concerns in mind, Budget 2025 may offer much-needed reforms to foster a more conducive environment for entrepreneurship and small business operations,” adds CA Jigar Suba.

Read quotes at- Income Tax Budget 2025 Expectations Live: Income tax reliefs for the middle class, changes in income tax slabs, standard deduction, 87A rebate hike in Union Budget 2025-26? – The Economic Times