India's upcoming Union Budget 2025, scheduled to be presented by Finance Minister Nirmala Sitharaman on February 1, is likely to feature a streamlined customs duty structure, with fewer tax slabs, as part of the government's ongoing initiative to simplify and modernise the country's trade policies.
India currently has more than 40 customs duty rates, including specific duties, and the proposed changes aim to streamline the system and reduce complications.
For Budget 2025, while the government's focus seems to be the simplification of income tax laws and expanding the income tax base, individuals eagerly await news on the reduction of their income tax outgo.
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Changes expected in the new tax regime
For salaried taxpayers, the standard deduction could be increased from the current Rs 75,000 ($867.46) to Rs 1 lakh ($1156.62). This was last increased in Budget 2024 from Rs 50,000 ($578.31) to Rs 75,000 ($867.46).
Extend the tax rebate under section 87A to taxpayers with taxable income up to Rs 1 million ($11566) from the existing limit of Rs 7 lakh ($8096).
The government's 'Housing for all' initiative might lead to the introduction of a deduction for interest on loans of up to Rs 2 lakh ($2313.23) for self-occupied house property in the new tax regime. Currently, this benefit is only available under the old tax regime.
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Tax benefit for interest on savings accounts and fixed deposits
To encourage savings when interest rates are low and inflation is high, the government could consider extending the deduction under Section 80TTA. Currently, this section only allows deductions on interest earned from savings accounts, up to a limit of Rs 10,000 ($115.66)
Extending this deduction to interest on term deposits and increasing the limit to Rs 50,000 ($578.31) would be a significant incentive for savers. This move would also align with the benefits already available to senior citizens under Section 80TTB, which allows deductions of up to Rs 50,000 ($578.31) on interest from deposits, including fixed deposits and recurring deposits.
Income tax benefits on buying Electric Vehicles (EV)
To boost electric vehicle (EV) adoption, the government could clarify tax benefits for employer-provided EVs and extend the deduction of up to Rs 1,50,000 ($1734.92) per annum on interest paid on EV loans, which currently expires on March 31, 2023.
Extending the due date for filing belated or revised tax returns
Taxpayers face challenges claiming foreign tax credits in India due to differing tax years. To address this, the deadline for filing revised/belated returns should be extended beyond Dec 31 of the assessment year.
(With inputs from agencies)