Union Budget 2025: Expectations For Simplified Tax Compliance, Enhanced Relief For Taxpayers Soar

The Union Budget for 2025 is set to be presented before Parliament on February 1, 2025.

The previous full Budget, presented in July 2024, had provided some relief to salaried taxpayers opting for the simplified tax regime, with an increase in the standard deduction from INR 50,000 to INR 75,000 and a revamp of the tax slabs.

Photo Credit: Pexels

This year's Budget is expected to build on these reforms, with a focus on boosting taxpayers' disposable income and easing compliance.

According to a report by News18, Finance Minister had laid the groundwork for a comprehensive review of the Income-tax Act in the July 2024 Budget to make the legislation more concise, clear, and easier to understand.

A committee set up by the CBDT to oversee this review has already received over 6,500 suggestions. With these suggestions under consideration, the upcoming Budget presents an opportunity for changes aimed at simplifying tax laws and easing tax compliance. Here are some of the key expectations for personal taxation in Budget 2025.

Easing TDS Compliance on NRI Real Estate Transactions

TDS compliance on property purchases from non-residents has long been a complicated process for Indian taxpayers. Under current rules, a buyer must withhold tax at the "applicable rate" when purchasing property from a non-resident seller.

This requires obtaining a Tax Deduction and Collection Account Number (TAN) and filing e-TDS returns. While obtaining a TAN is a one-off requirement, it often becomes inactive over time as transactions with non-resident sellers are infrequent.

Taxpayers are hoping for a system similar to the simplified challan-cum-return process available for resident sellers, which would allow them to complete TDS compliance without unnecessary administrative hurdles.

Easing Non-Resident Tax Compliance

A large number of individual taxpayers qualify as non-residents (NRs) in India. These individuals may earn income in India through employment with Indian companies or from passive income sources in India, which can trigger the requirement to file a tax return.

Currently, non-residents must file their tax return in Form ITR-2, even when they are not claiming any relief under a Double Taxation Avoidance Agreement. If any tax payment is due before filing, it must be made using one of the payment options available on the tax department's website.

However, all payment methods are limited to the Indian banking system, making the tax payment process more challenging for non-residents. Allowing NR taxpayers to use the simplified ITR-1 form when no double taxation relief is being claimed would significantly simplify their compliance.

Additionally, enabling tax payments directly from overseas bank accounts would streamline the process for these taxpayers.

Non-residents with tax refunds face further challenges. They must maintain a bank account in India to collect their refund. This issue could be alleviated by establishing a process for remitting tax refunds abroad.

Timelines for Filing Revised or Belated Returns

The filing timeline is another area that requires reform. Currently, the deadline for filing revised or belated returns is December 31 following the end of the financial year.

For taxpayers claiming double taxation relief, particularly foreign tax credits, this deadline often presents a limited window to accurately determine the foreign tax credit.

This is particularly problematic when the foreign tax credit relates to a country with a calendar year fiscal year, as the deadline coincides with their fiscal year-end. Extending the deadline to March 31 would provide taxpayers with more time to accurately claim foreign tax credits, avoiding the need for estimates.

Vivad Se Samadhan

One of the significant challenges faced by taxpayers and administrators is the backlog of tax disputes, especially at the first appellate level before the Commissioner of Income Tax (Appeals).

While the introduction of the Vivad Se Vishwas Scheme and the faceless appeal process has provided some relief, taxpayers still face delays, sometimes exceeding six years. A more efficient appeal disposal process, including automated appeal effects and refund issuance for resolved cases, could ease these burdens by closing long-standing disputes.

The Union Budget for 2025 presents an opportunity to reshape the personal tax landscape. By addressing long-standing challenges such as TDS compliance, overseas tax payments, refunds, and appeal backlogs, the government can create a fairer, more efficient tax system.

As taxpayers and stakeholders eagerly await the Budget announcement, the hope is that it will simplify individual tax compliance and empower taxpayers to contribute meaningfully to the nation's economic growth.

Whether these expectations are met will soon become clear, but the anticipation reflects a shared vision for a more equitable and inclusive tax regime.