Budget 2025 income tax: Hike basic exemption limit to Rs 5 lakh and reduce tax rates, says EY

Budget 2025 income tax expectations: Finance Minister Nirmala Sitharaman should consider raising the basic exemption limit from Rs 3 lakh to Rs 5 lakh under the new tax regime, says EY in its pre-Budget 2025 recommendations.
EY, a leading consultancy firm among the big four, has also recommended that the government reduce income tax rates particularly for lower-bracket taxpayers, and continue TDS rationalisation in the Union Budget 2025.
EY has said, "The upcoming budget should focus on personal tax relief by raising the basic exemption limit in the new tax regime from Rs 3 lakhs to Rs 5 lakhs and reducing tax rates. Clarifications on the perquisite valuation for EVs and clear guidelines for the taxation of cryptocurrency and non-fungible tokens (NFT), including the treatment of virtual digital asset (VDA) losses, are needed.”

The government will present the Union Budget on February 1, 2025, which will outline income tax slabs and various tax incentives for FY 2025-26.
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The Modi government has initiated efforts to streamline Income Tax Laws. In the Budget 2024, presented in July 2024, Finance Minister Nirmala Sitharaman announced a review of the Income Tax Act, 1961. EY says, "It should follow a consultative approach and invite public comments on the draft proposals."
Income Tax litigation has immobilised over Rs 31 trillion in FY2023-24, representing 9.6% of India's GDP. EY's press release emphasises the urgent need to address and reduce pending disputes whilst preventing new ones.