Various suggestions have been made to streamline taxes, make compliance easier, and review certain tax reliefs and provisions related to TDS. In recent years, the government has made progress in simplifying the process of filing and processing tax returns. The Finance Minister’s focus in the interim budget may be on making structural changes to make it easier for taxpayers to operate rather than providing significant tax breaks, except for a few.
The new tax regime is simpler and less burdensome, but many individuals still find the regular tax regime more financially advantageous due to the various tax reliefs available. More needs to be done to make the simplified tax regime more attractive, such as widening the tax slabs and reducing tax rates.
The capital gains tax regime needs rationalization as it is complex and difficult to understand. It is challenging for taxpayers to comply with the different tax rates and classifications based on holding periods and tax residency. A reevaluation of the entire capital gains taxation structure is necessary to appeal to the capital markets.
Under Section 80D, the deduction limit for medical expenses and insurance should be increased to reduce the financial burden on taxpayers. A level treatment for tax relief on savings and fixed deposit interest could be considered. The current threshold for deduction is very low, and an amendment is expected.
Compliance for globally mobile employees availing relief under Double Taxation Avoidance Treaties needs to be simplified. The process of claiming foreign tax credits or treaty relief should be made easier, and treaty relief at the tax withholding stage can be enabled by amending certain forms.
Tax compliance for overseas taxpayers can be made easier by allowing foreign bank accounts for tax payments, direct credit of tax refunds to overseas bank accounts, and implementing e-verification of tax returns via OTP to foreign mobile numbers or two-factor authentication.
The scope of information covered in the Annual Information Statement can be widened to enhance the pre-filing of tax returns.
The Finance Minister can introduce enabling provisions in the budget to ensure a smooth transition when the labor codes take effect, so that current tax relief for retirement benefits is not affected.
Overall, simplifying processes, increasing deduction limits, and improving compliance are some of the key expectations for the upcoming budget.
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