What you can expect on personal taxation in the Union Budget

Simplification of the current capital gains tax regime

Simplification of the current capital gain tax regime is a long pending demand.  There are different rates of tax for different categories of assets with no consistency in the period of holding used to classify an asset as short term or long term.  Additionally, there are different indexation rules and tax rates for residents and non-residents even if the investment instruments belong to a similar class.

Streamlining this system would benefit taxpayers, enabling accurate tax payments and filings. Rationalizing indexation benefits and tax rates for both resident and non-resident taxpayers with similar income sources will help enhance transparency and encourage overseas investment.

Tax incentives for electric or hybrid vehicles and rooftop solar installations

The Indian electric and hybrid vehicle market is growing, driven by various incentives like tax deductions on interest for loans, preferential GST rates, and subsidized road tax and registration costs. To further boost adoption, modifying perquisite valuation rules to consider maintenance and battery capacity will help. It is important to note that new vehicle buyers looking to benefit from loan interest deductions for electric vehicles should have secured loans before March 31, 2023. The upcoming budget is expected to extend this deadline, encouraging more taxpayers to embrace green energy.

Rooftop solar installations schemes can be encouraged to make a greener India.

Widening the tax base

The India income tax payer base has not increased in proportion to the general increase in prosperity and it continues to be dependent on the salaried workforce. In order to address this issue, the government should focus on the formalizing the informal sector (which accounts for significant part of India’s economy) viz. small businesses and street vendors by giving them incentives to register their businesses and making compliance easier for them.

In addition, the government should identify high income earners in the informal sector and increasing the ambit of tax collection at source by expanding to domestic luxury travel, etc. These measures will ensure widening of tax base and reducing the dependency on one sector for tax collections.

The current administration, now in its third term, is diligently executing its plan to achieve its vision of Viksit Bharat by 2047. By incorporating the inputs of ordinary taxpayers in the budget, the government can tackle issues, ease concerns, and enhance savings. This strategic approach is anticipated to drive increased spending and investment, aligning with the administration’s overarching goals.

This article has been written by Deepika Mathur, Executive Director, with inputs from Ankit Agarwal, Associate Director, and Nandini Jagannath, Assistant Manager, at Deloitte India.

(Views expressed are personal)