The government should increase the basic exemption limit to Rs 5 lakh from Rs 3 lakh under the new tax regime to provide more disposable income to the taxpayer, tax and consultancy firm EY said on June 27.
The firm highlighted that the government must double the standard deduction to Rs 1 lakh under the new tax regime. While income until Rs 7 lakh is exempt under the new tax regime, the government levies a 5 percent tax on income over Rs 3 lakh once income exceeds the level.
Industry bodies, in their pre-budget consultation with the government, also demanded the easing of the burden on taxpayers to boost consumption.
Private final consumption expenditure in FY24 was muted at 4 percent, despite the economy growing 8.2 percent in the year.
Experts indicate that such high growth rates are not sustainable without a supportive pick-up in consumption.
EY, besides changes to the personal income tax structure, also demanded an overhaul of the capital gains tax structure. “Enhance the extant tax-free LTCG ceiling on sale of equity shares/equity oriented mutual funds/units of a business trust from Rs 1 lakh to Rs 2 lakh,” it said.
The agency also demanded an extension of tax payment deferment for employee stock options at the time of sale to all employers, instead of just eligible start-ups.
In the 2020 Budget, the government had extended the benefit to eligible start-ups, but the universe to which it applies remained limited.
Besides, the firm demanded clarity on TDS and Systematic Lump Sum Withdrawal (SLW) facility under NPS.
“In terms of rationalisation measures, the complex structure of Tax Deducted at Source (TDS) rates across different categories of payments has created confusion and compliance burdens. Simplifying these rates by consolidating categories and creating a small "negative list" of non-liable payments for TDS could streamline processes and reduce disputes,” said Sameer Gupta, National Tax Leader, EY India.
For indirect taxes, EY suggested a simplification of customs compliance procedures, a one-time dispute resolution scheme should be introduced under Customs and GST law, an extension of RoDTEP benefits.
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