Image Source : FREEPIK Budget 2025.
Budget 2025: In the forthcoming budget for 2025-26, the government needs to reduce tax and compliance burden on the salaried class and MSMEs to boost consumption and investment, Nangia & Co LLP Founder and Managing Partner Rakesh Nangia said.
Also, the Budget should focus on simplification of Income Tax Return (ITR) forms, and further rationalising capital gains tax and Tax Deduction at Source (TDS) threshold and tax rates. Further, Nangia said to spur private sector investment a key ask of the small and medium enterprises is that the tax rate should be reduced and concessional tax rate for the manufacturing sector.
About 98 per cent of manufacturing activities are undertaken by small and medium enterprises and it need special treatment. For the Ministry of Micro, Small and Medium Enterprises (MSMEs) below a specified revenue threshold, the Budget should lower the taxation rate, Nangia added.
Salaried people hit by ‘inflation’
“The salaried people are hit by inflation as well as burdened in filing ITR forms. Personal income, inflation and compliance income tax slabs need to be rationalised. Basic exemption should hit Rs 10 lakh. Personal I-T salaried people are hardest hit. “Standard deduction should be increased, so that there is additional cash in their pocket which would in turn spur consumption,” Nangia told media.
Currently, individuals can file their ITR either under the old tax regime which offers benefit of deductions and exemptions, or under the new tax regime which offers a lower rate of taxes. The 2024-25 Budget had hiked standard deduction for salaried taxpayer to Rs 75,000, and deduction on family pension for pensioners to Rs 25,000 under the new tax regime.
New tax regime
The new tax regime exempts income up to Rs 3 lakh. Those earning annually between Rs 3-7 lakh pay 5 per cent tax, Rs 7-10 lakh (10 per cent), Rs 10-12 lakh (15 per cent), Rs 12-15 lakh (20 per cent) and above Rs 15 lakh (30 per cent).
The old tax regime, however, exempts income up to Rs 2.5 lakh from taxes. Income from Rs 2.5-5 lakh attracts 5 per cent tax, and 20 per cent for income between Rs 5 lakh and Rs 10 lakh. A 30 per cent tax is levied on income above Rs 10 lakh.
Tax reduction for EVs, semiconductors
On the corporate tax side, Nangia suggested that there should be rationalisation of tax rates on certain new-age business. There should be a reduction in tax rates for EVs, semiconductors and data centres. Lower tax rates should be brought in for new age business, he said Nangia also suggested that all small and medium enterprises should be allowed to move to presumptive taxation.
Under presumptive taxation, they would not have to maintain a record of balance sheet and books of accounts. Also, there would be ease in filing tax returns.
