Budget 2025-26: Reduce Tax Burden on Middle Class, SMEs: Nangia

New Delhi, Jan 13 (PTI) The government in the forthcoming budget for 2025-26 needs to reduce tax and compliance burden on the salaried class as well as MSMEs to boost consumption and investment, Nangia & Co LLP Founder and Managing Partner Rakesh Nangia said on Monday.

Also, the Budget should focus on simplification of Income Tax Return (ITR) forms, and further rationalising capital gains tax and Tax Deduction at Source (TDS) threshold and tax rates.

Further, Nangia said to spur private sector investment a key ask of the small and medium enterprises is that the tax rate should be reduced and concessional tax rate for the manufacturing sector.

About 98 per cent of manufacturing activities are undertaken by small and medium enterprises and it need special treatment. For MSMEs below a specified revenue threshold, the Budget should lower the taxation rate, Nangia added.

"The salaried people are hit by inflation as well as burdened in filing ITR forms. Personal income, inflation and compliance income tax slabs need to be rationalised. Basic exemption should hit Rs 10 lakh. Personal I-T salaried people are hardest hit. “Standard deduction should be increased, so that there is additional cash in their pocket which would in turn spur consumption," Nangia told PTI Videos.

Currently, individuals can file their ITR either under the old tax regime which offers benefit of deductions and exemptions, or under the new tax regime which offers a lower rate of taxes.

The 2024-25 Budget had hiked standard deduction for salaried taxpayer to Rs 75,000, and deduction on family pension for pensioners to Rs 25,000 under the new tax regime.

The new tax regime exempts income up to Rs 3 lakh. Those earning annually between Rs 3-7 lakh pay 5 per cent tax, Rs 7-10 lakh (10 per cent), Rs 10-12 lakh (15 per cent), Rs 12-15 lakh (20 per cent) and above Rs 15 lakh (30 per cent).

The old tax regime, however, exempts income up to Rs 2.5 lakh from taxes. Income from Rs 2.5-5 lakh attracts 5 per cent tax, and 20 per cent for income between Rs 5 lakh and Rs 10 lakh. A 30 per cent tax is levied on income above Rs 10 lakh.

On the corporate tax side, Nangia suggested that there should be rationalisation of tax rates on certain new age business. There should be a reduction in tax rates for EVs, semi conductors and data centres. Lower tax rates should be brought in for new age business, he said

Nangia also suggested that all small and medium enterprises should be allowed to move to presumptive taxation. Currently, small businesses with an annual turnover of up to Rs 3 lakh are allowed to opt for presumptive taxation subject to condition that cash receipts is up to 5 per cent of total receipts.

Under presumptive taxation, they would not have to maintain record of balance sheet and books of accounts. Also, there would be ease in filing tax returns.