Anticipation is growing in many sectors as the Finance Minister and her staff begin to draft the Union Budget 2025. Both taxpayers and those interested in personal finance want to know how the proposed budget will affect their financial situation. 

Some of these demands are old and unlikely to be met, such as a bigger tax exemption for senior persons, a lower tax on annuities, and a separate deduction for life insurance. North Block might, however, find some further recommendations worthwhile. One expert, for example, recommended rewarding taxpayers with a group life insurance policy that is connected to the taxes they pay. The cost of a group insurance policy can be covered with as little as 1% of an individual’s taxes, which is equivalent to five times the tax paid.

Steps that could increase the NPS’s appeal to investors

have been proposed by another expert. Despite having all the features one could want in a pension plan, the ultra-low-cost plan is still not the best financial option for retirement planning. Maybe greater tax breaks are required to encourage people to join a plan that will enable them to live comfortably in retirement.

Reducing the TCS on international remittances is one important recommendation. This was increased from 5% to 20% two years ago, which made it extremely challenging for anybody who wanted to send, invest, or spend money outside. By submitting tax returns, the TCS can be refunded. The purpose of the law was to make sure that anyone who sent or spent money abroad were also submitting their tax returns. Although the goal appears just, such limitations on money flows in a globalized economy make little sense. If not eliminated entirely, the TCS should be lowered to 5–10% of the total amount being shipped outside.

However, the government’s emphasis on fiscal consolidation

offers limited opportunity for tax breaks, which will lead to a decrease in revenue. According to one estimate, the government’s coffers lose Rs. 3,000 crore for every ~10,000 increase in the basic tax exemption ceiling. For 2024–2025, the government has set a gross budget deficit goal of 4.9% of GDP. In the prior year, it was 5.6% of GDP.

Additionally, experts have recommended reducing uncertainties in tax legislation and simplifying tax systems.

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