What do taxpayers want from Budget 2025? Lower taxes, higher exemptions

Ahead of the much-anticipated Union Budget 2025, Grant Thornton Bharat unveiled its pre-budget survey, shedding light on the key expectations of individual taxpayers. A majority of respondents prioritize lower tax rates and higher exemptions, reflecting their need for financial relief and increased disposable income. The survey highlights a shift towards the simplified new tax regime, with 72% of taxpayers opting for it. 

 

However, adjustments like lower tax rates and increased exemption limits are demanded to make it more appealing. Further, taxpayers have called for targeted incentives, including enhanced benefits for the National Pension Scheme (NPS) to encourage long-term savings and sustainable initiatives like tax incentives for electric vehicles (EVs). 

 

 

Simplification of tax compliance processes also emerged as a crucial need, particularly for NRIs, with suggestions such as enabling tax payments through foreign banks and operationalizing overseas refunds. 

 

Key Survey Highlights:

• Lower Tax Rates and Higher Exemption Limits: 57%, expressed a desire for reduced tax rates, while 25% are advocating for higher exemption limits.
• Preference for New Tax Regime: 72% of taxpayers have opted for the new, simplified tax regime, with many pushing for additional reforms to make it even more attractive.
• Support for National Pension Scheme (NPS) Reforms: 53%, are calling for more flexible withdrawal rules and higher tax exemptions for premature withdrawals or annuity payouts.
• Electric Vehicle (EV) Incentives: Taxpayers are seeking the re-introduction of tax incentives to promote electric vehicle adoption, with 66% in favor of tax deductions for EV loan interest.
• Tax Filing Simplifications: 56% of respondents support an increase in the income threshold for tax filing to reduce the compliance burden for small taxpayers, especially for those living abroad.

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What Do Taxpayers Want in Budget 2025?

As the Union Budget approaches, individual taxpayers across India have made it clear that they are looking for relief in the form of tax reductions and simplified processes. Here’s a closer look at what they expect:

 

1. Personal Tax Relief: The Need for Lower Tax Rates

 

The most significant expectation from the taxpayers is a reduction in tax rates. According to the survey, 57% of respondents are calling for lower personal tax rates to improve their disposable income. Furthermore, 25% of respondents want an increase in exemption limits, which would allow them to save more without facing heavy tax deductions. Additionally, 11% have advocated for a hike in the standard deduction limit, which would directly benefit salaried individuals.

 

What Taxpayers Are Saying:

 

• Lower Tax Rates: 57% support lowering tax rates across income slabs.
• Increase Exemption Limits: 25% believe higher exemption limits would make a significant difference.
• Hike in Standard Deduction: 11% want an increase in the standard deduction limit under the new tax regime.

2. New vs. Old Tax Regime: What Needs Improvement?

While a significant 72% of taxpayers have already shifted to the new, simplified tax regime, the survey suggests that further changes are needed to make it more attractive. Nearly 46% of respondents believe that the new tax regime would be more appealing if tax rates were lowered, while 26% call for increased exemption limits.

 

However, despite the government's indication that the old tax regime may eventually be phased out, 63% of respondents still prefer an increase in deduction limits under the old tax system. This shows that taxpayers continue to value the old system’s exemptions and deductions.

 

What Needs to Change?:

 

• New Tax Regime: Taxpayers want lower tax rates (46%) and higher exemption limits (26%).
• Old Tax Regime: 63% desire an increase in deduction limits.

3. Tax Filing Simplification: Streamlining Compliance Processes

As the financial landscape becomes increasingly digitized, taxpayers are seeking more efficient ways to comply with tax obligations. According to the survey, 56% of respondents support increasing the income threshold for tax filing, which would alleviate the burden on small taxpayers.

 

Additionally, 38% of respondents, particularly Non-Resident Indians (NRIs), are pushing for the ability to make tax payments through overseas banks, while 35% believe that e-verification using OTPs sent to foreign mobile numbers should be allowed.

 

Tax Filing Expectations:

 

• Increase Income Threshold: 56% want a higher income threshold for tax filing.
• NRI Taxpayer Support: 38% of NRIs seek the ability to make payments through foreign banks.
• E-verification for NRIs: 35% favor the use of OTPs for verification of tax filing.
• 4. Promoting Long-Term Savings: National Pension Scheme (NPS) Reforms

The National Pension Scheme (NPS) has long been a crucial avenue for retirement savings. The survey found that 53% of taxpayers would like to see more flexibility in NPS withdrawal rules, while 36% advocate for higher tax exemptions on premature withdrawals or annuity payouts.

 

5. Electric Vehicle (EV) Tax Incentives

With a growing focus on environmental sustainability, taxpayers are calling for greater tax incentives to promote the use of electric vehicles. The government had previously introduced tax deductions for EV loans, but the survey reveals that taxpayers want these incentives reintroduced.

 

66% of respondents are advocating for tax incentives on EV loans, and 14% seek greater clarity on how EV-related perquisites are taxed. Reintroducing these incentives would not only promote the adoption of electric vehicles but also align with the government’s sustainability goals.

 

Key Findings on EV Tax Incentives:

 

Tax Deduction for EV Loans: 66% of respondents want the reinstatement of tax deductions for EV loan interest.

Clarity on EV Taxation: 14% want clearer rules regarding the taxation of EV-related perquisites. 

6. Support for Disabled Dependents: Increasing Deduction Limits

In response to growing concerns about the financial burden on caregivers, the survey also indicated a need for increased deductions for taxpayers supporting dependents with disabilities. 46% of respondents want the deduction limit for disabled dependents to be raised, while 18% support expanding the scope of recognized disabilities to include more conditions. 

 7. Property-Related Tax Relief

 

53% advocate for the set-off of house property losses under the new tax regime, while 47% support removing or increasing the Rs 2 lakh limit under the old regime.