Another Big Budget Day has rolled around and everyone — from housewives fretting over pinched kitchen budgets to businessmen hoping to ride out this tense period of uncertainty before clambering on to the next tidal wave of growth – is waiting eagerly to see what Finance Minister Nirmala Sitharaman unwraps in her sixth full budget.

The upcoming budget for 2024-25 is likely to be used to signal any changes in policies and preferences as well as for clearly laying down the foundation for robust medium-term growth and fiscal consolidation.

The finance minister is likely to achieve a fine balancing act by managing the fiscal deficit and yet enhancing economic growth. The emphasis on capital expenditure designed to spur infrastructure expansion will continue. But she will at the same time stick to fiscal rectitude by slashing major subsidies while cranking up tax revenues. The average real GDP for FY25 is expected to be between 7-7.5 per cent which would be a significant achievement in spite of the expected drag on global growth.

Ease of Doing Business has been a strong article of faith for the Narendra Modi government and she will continue to push this agenda. But industry will be looking for a couple of specifics this time round.

The uncertainty in the legal processes and the time consumed by the courts and other appellate forums in resolving disputes have been a major challenge to the general concept of “ease of doing business”. One-time dispute/litigation resolution/settlement scheme should be introduced under the customs law and the goods and services tax (GST) regime to settle and resolve the pending disputes.

Implementation of the online module for payment of differential custom duty/ interest/ other amounts and online amendment of Bill of Entry would certainly be a key step to ensure “ease of doing business” for importers/exporters.

MOOWR 2019 was introduced in line with the ‘Make in India’ objective. The acronym stands for Manufacturing and Other Operations in Warehouse Regulations. It was designed to provide foreign businesses with a simplified approval process for manufacturing operations within a bonded warehouse. But industry will be looking for procedural rationalisation to provide greater clarity and ensure ease of doing business.

Tax perspective

The big ask from taxpayers is an increase in the basic exemption limit and the reduction in rates under the new tax regime.

The government is expected to increase the basic exemption limit under the new tax regime from ₹3,00,000 to ₹5,00,000 and also reduce tax rates under the new tax regime to provide some relief to individual taxpayers.

There is also a demand for an increase in the tax deduction limit on home loan interest under Section 24 to ₹3,00,000.

With the increasing prices of residential properties, the government should consider revising the deduction limit of ₹2,00,000 on home loan interest to ₹3,00,000. This will not only motivate the middle-class individual taxpayers to invest in a residential house but also help the real estate developers.

Taxpayers will be hoping that the government will finally concede a long-time demand to raise the standard deduction limit to ₹1,00,000 from ₹50,000 at present. With the rise in the cost of living and inflation, an increased deduction limit will come as a huge relief to salaried individuals.

The salaried class is also hoping to see a revision in the deduction limit in HRA calculation from 40 per cent to 50 per cent for other metropolitan cities.

The cost of renting a house in cities like Bangalore, Ahmedabad, Pune, etc. is often higher than certain parts of metropolitan cities like Calcutta and Chennai. This step will help a large population in non-metro cities to trim a significant amount of tax. Therefore, it is expected to increase the limit from 40 per cent to 50 per cent of basic salary for such other cities as well.

The government must come out with clarifications on taxation of employer’s contribution to specified funds in excess of ₹7.5 lakh and ‘accretions’ thereon. The computation methodology of taxation of employer’s contribution to specified funds in excess of ₹7.5 lakh and ‘accretions’ thereon may be suggested by the government. The withholding tax implications on interest earned on employees’ PF contributions of more than ₹2.5 lakh per annum may be deferred to withdrawal/cessation of employment as against TDS on accrual basis.

Automobile makers and their customers are keenly waiting for a clarification on the interest deduction on the loan taken to purchase electric vehicles. The government may increase the scope of deduction in respect of purchase of electric vehicles (viz. quantum of interest deduction and removal of the sunset period for sanction of loan).

Capital gains

The capital gains structure can be expected to be rationalised in terms of rates and holding periods for various asset classes (equity, debt, immovable property). Standardisation of holding period and uniformity in tax rates across various asset classes may be on the cards. This is the need of the hour to ensure greater retail investor participation and minimise the scope for any tax arbitrage loopholes that prevail today.

Withholding tax

A road map to reduce the disparity in TDS rates may be introduced by the government to clear the confusion among taxpayers on account of varying rates of TDS depending upon the status of payees or the nature of payments.

Employment

In the present tax regime, when a certain class of persons opt for deductions in respect of additional employment generated during the year, they have to contend with a tough cap. The maximum emoluments payable to additional employees is restricted to ₹25,000 per month. This needs to be enhanced to ₹1,00,000 per month to encourage greater employment in industry.

Sop for non-corporates

Limited Liability Partnerships (LLPs) have become a highly preferred legal structure for doing business in India. This might be the right time for the government to extend the lower tax regime of 22 per cent to the other non-corporates as well.

The government may also want to probe deeper into the technical issues that the Central Processing Centres (CPCs) have been battling and ensure that taxpayers do not have to moan over delays in refunds and TDS credits.

(Views expressed are personal)