Budget 2025 Income Tax Expectations

Finance Minister Nirmala Sitharaman is called upon by Assocham to consider reducing personal income tax rates in the upcoming Union Budget 2025. This move aims to enhance tax compliance among individuals, following the trend of globally competitive corporate tax rates.

The current scenario shows a significant gap between personal and corporate tax rates, with the highest marginal rate for individuals soaring to 42.744% under the old regime and 39% under the new regime, compared to the corporate tax rate of 25.17%.

Global Comparison Highlights Discrepancy

Assocham points out the stark contrast in personal income tax rates between India and other countries such as Hongkong (15%), Sri Lanka (18%), Bangladesh (25%), and Singapore (22%). This discrepancy has led to a shift in business structuring preferences towards the corporate model.

Complexity in Taxation

The coexistence of two tax regimes has complicated the income tax system for individuals, with varying rates based on income sources and differing surcharge rates depending on total income and capital gains. Assocham emphasizes the need for simplification and reduction in tax rates to align with global standards and encourage compliance.