Anticipating the 2025 Union Budget: A Leap Towards Economic Growth

As India gears up for the 2025 Union Budget, taxpayers and businesses alike are on the edge of their seats, awaiting reforms that promise to steer the country's economy towards unprecedented growth. With the third tenure of PM Modi in full swing, the spotlight is on the government's economic strategies and key announcements expected in the upcoming budget.

EY India's Vision for the 2025 Budget

EY India has laid out a comprehensive wishlist for the 2025 budget, emphasizing the need for increased capital expenditure, a reduction in the debt-to-GDP ratio, and enhanced tax exemptions. The firm advocates for a simplified tax system, improved taxpayer services, and measures to reduce litigation and improve compliance. With over Rs 31 trillion stuck in unresolved income tax cases, EY also suggests innovative dispute prevention mechanisms to alleviate the burden on the taxation system.

Key Recommendations by EY India

Tax Exemption Limit: Proposing an increase in the basic exemption limit from Rs 3 lakh to Rs 5 lakh under the new tax regime, alongside reduced tax rates to ease the financial strain on common taxpayers.

Deferring TDS: Suggesting the deferment of TDS on PF interest above Rs 2.5 lakh until withdrawal, streamlining the TDS rate structure, and extending ESOP tax deferment benefits across the board.

Property Cap and HRA: Advocating for the removal of caps on house property loss set-offs and extending 50% HRA exemptions to tier-2 cities for tax parity.

Digital Assets: Calling for clearer guidelines on the taxation of digital assets like cryptocurrency and NFTs, including provisions for loss treatment.

Capital Gain Structure: Recommending a streamlined capital gains framework to address discrepancies and align holding periods for various assets.

Driving Sustainable Economic Growth

EY India underscores the importance of fiscal consolidation, tax system simplification, and investment-driven growth as pillars for sustainable economic development. With a focus on reducing the fiscal deficit and debt-to-GDP ratio, the firm highlights the necessity of increased capital expenditure and progressive interest rate reductions to stimulate private sector investment.

Sameer Gupta, National Tax Leader at EY India, expresses optimism for the upcoming budget, anticipating steps towards the implementation of a direct tax code and personal income tax reductions to bolster demand among lower-income groups.

As the formal preparation for the 2025-2026 budget is already underway, all eyes are on Finance Minister Nirmala Sitharaman's eighth budget presentation, scheduled for February 1, 2025. The pre-budget consultations with experts, state officials, industry leaders, and economists signal a promising horizon for India's economic trajectory.