Income Tax: EY India said in its suggestion on Wednesday, to reduce the compliance burden, tax deduction at source (TDS) on PF interest rate (above 2.5 lakh) should be deferred till the withdrawal stage. In the last budget, the TDS rate was rationalized to some extent.
Income Tax: The government may consider increasing the tax exemption limit from three lakhs to five lakhs in the new tax system in the budget for 2025-26. Tax rates can also be reduced to give relief to taxpayers. Ernst & Young (EY) India said in a pre-budget suggestion report, the government should focus on giving relief to taxpayers on the tax front in the upcoming budget. There should also be an attempt to resolve the income tax dispute of Rs 31 lakh crore (9.6 per cent of GDP) by 2023-24.
EY India said in its suggestion on Wednesday, to reduce the compliance burden, tax deduction at source (TDS) on PF interest rate (above 2.5 lakh) should be deferred till the withdrawal stage. In the last budget, the TDS rate was rationalized to some extent. The TDS rate structure can be divided into three-four categories with lower rates.
According to the report, a complete review of the Direct Tax Code may take time. A reduction in personal income tax is also expected. A decision can be taken to provide relief especially to low-income groups and to increase demand. Employee Stock Option Plan (ESOP) tax deferral benefits should be extended to all employers and tax payment should be allowed at the sales level.
Need to simplify the tax system and reduce litigation
EY said, to increase demand and consumption in the economy, it is very important to simplify the tax system and improve taxpayer services. Significant reforms are needed to reduce litigation and increase tax compliance. Measures should be taken on a priority basis to reduce pending tax disputes and avoid further disputes. For this, there is an urgent need to strengthen the alternative dispute resolution mechanism. Other dispute resolution options like safe harbor should be made more attractive.
50 percent discount in house rent allowance
The report suggests that 50 percent discount should be given on house rent allowance (HRA) in cities like Hyderabad, Pune, Bangalore and Ahmedabad. This will provide tax parity. At present, 50 percent discount is available on HRA only in four metro cities. Clarity is also expected in the budget for taxation of cryptocurrency.
Emphasis will also have to be given on increasing expenditure and investment
The budget may focus on increasing government expenditure, reducing fiscal deficit, encouraging private sector investment and targeted tax reforms. Bringing the fiscal deficit to 4.5 percent will also be a priority.
