Ernst & Young mentioned that the Union Budget 2025-26 must give priority to furnishing tax relief before the common taxpayers via raising the basic exemption limit in the updated tax regime and lessening the compliance load on small and medium enterprises.
It was recommended by the global consulting firm that the basic exemption threshold in the new tax regime must surge from Rs 3 lakh to Rs 5 lakh and tax rates are to be reduced.
Tax expert, I expect a reduction in personal income tax specifically for the lower-income groups to furnish relief and boost demand. For the business specifically SMEs lessening the tax complexity compliance is critical.
It directed to the massive backlog of pending income tax cases, and EY asked for supporting other dispute resolution procedures such as Advance Pricing Agreements and safe harbours.
As of 2023-24, exceeding Rs 31 lakh crore, which is 9.6% of the country’s GDP, was locked in income tax litigation.
Read Also: FICCI Urges Tax Reforms Ahead of Union Budget 2025-26 to Ease Tax Compliance
Lessening the pendency of disputes and preventing the disputes is required to be chosen on priority grounds. For the same concern, the additional issues prevention options such as safe harbours must be made lucrative. EY said that the existing safe harbour margins are much higher and are to be rationalized.
As it is under the tax law simplification exercise, in the previous budget TDS rate rationalisation was performed to a specific limit. TDS rate structure can be classified into 3-4 broad classes with lower rates and a negative list to ease the whole gamut of withholding tax provisions.
It also mentioned that among other reforms defer TDS on interest earned on employee’s PF contributions exceeding 2.5 lakhs to the withdrawal phase for reduced compliance.
