Budget 2025: EY, industry seek tax relief, housing, and compliance reforms

The Union Budget for 2025-26 will be presented in the Parliament on February 1. Tax payers and retail loan borrowers are eagerly anticipating measures in the upcoming budget that aim to alleviate financial burdens and foster economic growth. EY, (a consultancy firm) and voices from the industry presented their expectations from the government.

 

What did EY say? 

EY India suggests increasing the basic exemption limit in the new tax regime from Rs 3 lakh to Rs 5 lakh. This proposal, along with reduced tax rates, could provide substantial relief to middle-income groups.

 

The firm recommends postponing the tax deduction at source (TDS) on provident fund (PF) interest exceeding Rs 2.5 lakh until the withdrawal stage, simplifying compliance for salaried individuals.

 

EY India also advocates for extending the ESOPs tax deferral benefit to all employers and permitting tax payment at the stage of sale.

 

The cap on setting off house property losses against other income heads should be removed. Additionally, in Tier-2 cities like Hyderabad, Pune, Bengaluru, and Ahmedabad, the house rent allowance (HRA) exemption should be set at 50 percent to ensure tax parity. Currently, only four metro cities benefit from a 50 per cent HRA exemption.

 

EY India, in its budget expectation note, said with over Rs 31 lakh crore stuck in income tax disputes as of 2023-24, there is an urgent need to clear Commissioner of Income Tax (Appeals) backlog and bolster alternate dispute resolution mechanisms like advance pricing agreements and safe harbours.

 

“While a full comprehensive review of the direct tax code may take time, we might see some initial steps toward its implementation in this budget. I also hope for a reduction in personal income tax, particularly for the lower-income groups, to provide relief and stimulate demand. For businesses, particularly SMEs, reducing the complexity of tax compliance is critical. Streamlining TDS rates into fewer categories and eliminating redundant provisions will ease the administrative burden, allowing businesses to focus on growth and innovation,” said Sameer Gupta, National tax leader, EY India.

 

Voices from the industry 

“Key area of interest is the extension of credit-linked subsidy schemes, such as the Pradhan Mantri Awas Yojana (PMAY). These schemes play a crucial role in improving housing affordability and empowering first-time homebuyers. Borrowers are also optimistic about innovative measures that align lending practices with sustainability goals, such as subsidies for green housing loans and advancements in the digital lending framework. Such initiatives not only promote financial transparency but also encourage environmentally responsible investments,” said Rishabh Goel, co-founder and CEO, Credgenics.

 

“An amnesty scheme for customs duties in Budget FY26 would be a welcome step. Similar schemes under service tax, excise, and GST laws have proven effective in resolving long-pending disputes and increasing revenue collection. For customs, such a scheme could encourage importers to regularise past non-compliances by offering reduced penalties and interest. It would also provide much-needed clarity and closure for businesses, enabling them to focus on future growth without the overhang of litigation. A well-structured scheme can foster trust between the trade community and the government while boosting compliance and ease of doing business,” said Sandeep Chilana, managing partner, CCLaw.

 

“At present, there are various modes to pay taxes in India, such as NEFT/RTGS, net banking, debit cards, UPI, or over-the-bank counters. However, these are only possible when the taxpayer has an active Indian bank account. Hence, taxpayers, including NRIs, who don’t have an Indian bank account or don’t have net banking/other online payment facility for Indian bank accounts face huge difficulties. Additionally, the tax refunds are also not credited in the overseas bank accounts. To address this issue, measures may be taken to facilitate tax payments from an overseas bank account as well as for credit of tax refund directly in the overseas bank account,” said Akhil Chandna, partner, Grant Thornton Bharat.

 

“Our expectation from the budget is on a clear regulatory framework for digital assets. A reduced TDS and tax rationalisation on the crypto transactions, providing incentives for blockchain and AI innovation can empower the Indian startup ecosystem and businesses to thrive in this promising sector,” said Srinivas L, Founder & CEO, 9Point Capital (digital asset management company).