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The upcoming Union Budget 2025, scheduled for February 1st, holds significant implications for Indian taxpayers, particularly concerning personal taxation. Building upon the July 2024 Budget's relief measures – a heightened standard deduction and revised tax slabs – the 2025 budget is expected to further enhance taxpayers' disposable income and streamline compliance procedures. The Finance Minister's initiative to comprehensively review the Income-tax Act, aiming for clarity and ease of understanding, is a crucial step in this direction. A committee established by the Central Board of Direct Taxes (CBDT) has already collected over 6,500 suggestions for improvement, highlighting the widespread need for reform and the potential impact of the upcoming changes.
One key area of anticipated reform revolves around easing Tax Deducted at Source (TDS) compliance, especially for Non-Resident Indians (NRIs) involved in real estate transactions. Currently, the process of withholding tax from non-resident sellers is complex, requiring buyers to obtain a Tax Deduction and Collection Account Number (TAN) and file e-TDS returns. The infrequent nature of these transactions often leads to inactive TANs, creating unnecessary administrative burdens. Taxpayers hope for a more streamlined system, similar to the challan-cum-return process for resident sellers, eliminating these bureaucratic hurdles. This simplification would significantly reduce the administrative burden and enhance ease of compliance for both buyers and sellers involved in international real estate dealings.
Further easing of compliance is expected for NRIs in general. Many NRIs earn income in India, either through employment or passive income sources, necessitating Indian tax return filings. The current system requires them to use Form ITR-2, even if no Double Taxation Avoidance Agreement (DTAA) relief is claimed, posing difficulties. The proposal to allow NRIs to utilize the simpler ITR-1 form, when no DTAA relief is claimed, would significantly simplify their compliance. Additionally, enabling direct income tax payments from overseas bank accounts and creating a system for remitting tax refunds outside India would eliminate significant logistical challenges faced by this group. These changes would significantly improve the experience of NRI taxpayers who often have to deal with additional complications due to their residence status.
Another major concern addressed in the upcoming Budget is the timeline for filing revised or belated tax returns. The current deadline of December 31st presents significant challenges for taxpayers seeking double taxation relief, especially those needing to claim credits for taxes paid in foreign jurisdictions. The limitation is particularly problematic when foreign tax credits need to be claimed from countries operating on a calendar year basis, as this often creates a time constraint for accurate reporting. Extending this deadline to March 31st would provide much-needed flexibility, allowing taxpayers sufficient time to accurately calculate foreign tax credits without resorting to estimations, thus leading to better accuracy and compliance. This would remove a significant administrative burden and ensure the process is less stressful and more efficient for taxpayers.
Finally, the persistent problem of pending tax disputes, especially at the first appellate level, needs to be tackled. While initiatives like the Vivad Se Vishwas Scheme and the faceless appeal process have brought some relief, substantial delays, often exceeding six years, continue to plague the system. The implementation of a more robust and automated appeal disposal system, coupled with expedited refund issuance for resolved cases, is essential. This would not only alleviate hardships for taxpayers but also enhance the efficiency and responsiveness of the tax administration. Reducing the backlog of appeals and speeding up the resolution process is crucial for a fairer and more efficient tax system.
In conclusion, the Union Budget 2025 presents a significant opportunity to transform the personal taxation landscape in India. By proactively addressing long-standing challenges related to TDS compliance, particularly for NRIs, streamlining tax return filing processes, extending deadlines for accurate foreign tax credit claims, and accelerating the resolution of tax disputes, the government can create a more fair, transparent, and efficient system. The success of these measures will not only simplify compliance for individual taxpayers but also contribute positively to the nation's economic progress. The level of anticipation surrounding the upcoming budget is a testament to the widespread desire for a more equitable and accessible tax system.
Source: Union Budget 2025: Impact Of Upcoming Budget On Taxpayers And Personal Taxation Landscape