With Budget 2025 around the corner and Finance Minister Nirmala Sitharaman set to present her 8th Budget overall and the 2nd under the Modi 3.0 regime, tax experts and taxpayers alike have high expectations regarding direct taxes.
There is growing anticipation that the Modi government will ease the tax burden on the middle class, provide relief from high inflation, and simplify compliance processes, as taxpayers are currently facing challenges with the dual tax regime.
Taxpayers have a plethora of demands, including the introduction of a New Direct Tax Code (DTC), revisions to personal income tax slabs, concessional tax rates under the new tax regime, simplification of tax filing, reduction in litigation timelines, and the introduction of a sunset clause for the old tax regime.
Tax experts are also rallying for a shift from the financial year to a calendar year for tax purposes. This change, they argue, will align India’s tax framework with global standards, improve administrative efficiency, and offer greater clarity for businesses and individuals.
Aakash Uppal, Partner & Leader (North & East), Corporate Tax, Tax and Regulatory Services, BDO India, said, “The DTC is also expected to bring about several other important changes. These include shifting to a calendar year for tax purposes instead of the financial year, simplifying the residential status for individuals by removing complex categories like ‘Resident but not Ordinary Resident’, introducing unified tax rates for domestic and foreign companies, and expanding the tax base for withholding taxes. Additionally, further rationalising of withholding tax rates and provisions is anticipated.”
Also read: Budget 2025: Annual income up to Rs 10 lakh to be tax-exempt? Higher deductions, new 25% slab on taxpayers’ wishlist
How will the shifting to a calendar year tax system impact taxpayers?
Switching to a calendar year tax system, as proposed by tax experts ahead of Budget 2025, might see both benefits and challenges for taxpayers. On the one hand, aligning the tax year with the calendar year (January to December) would help align the system with global standards, which will simplify tax compliance for multinational companies and NRIs. This might also streamline financial planning by syncing tax deadlines with calendar-based income and expense cycles.
However, the transition might cause some initial difficulties and challenges also as taxpayers and businesses adjust to the new timeline.
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