Budget 2025 income tax: The highest marginal rate for individuals is 42.744%. (AI image)
Budget 2025 income tax expectations
: Finance Minister Nirmala Sitharaman should look to reduce the
personal income tax
rates in the
Union Budget 2025
, says
Assocham
in its pre-Budget 2025 memorandum.
“While
corporate tax rates
have become globally competitive, in order to ensure larger tax compliance by individuals, similar reduction in personal tax rates is recommended,” Assocham says.
Finance Minister Nirmala Sitharaman will present the Union Budget 2025 on February 1, 2025.
Consequent to the reduction of corporate tax rates, the differential between personal and corporate tax has widened. The highest marginal rate for individuals has now gone up to 42.744% (highest slab) and 39% in the new tax regime against the normal corporate tax rate of 25.17%, notes the industry chamber.
Also Read | Budget 2025 income tax: Hike basic exemption limit to Rs 5 lakh and reduce tax rates, says EY
“The high personal tax rate for individuals in India stands out as an exceptionally high rate as compared to other countries,” it says.
- For example, the maximum rates of personal income in Hongkong is 15%, Sri Lanka – 18%, Bangladesh – 25% & Singapore – 22%.
- Further, the huge gap in the tax rates as mentioned between individual and corporate tax rates is leading to several structuring decisions being adopted in favour of the corporate model (for example, proprietorship business moving to company format).
“With two tax regimes in place, income tax for individuals has become very complicated. Further, there are different rates of taxes depending upon the source of income. In addition to this, different rates of surcharge are applicable depending upon the total income and capital gains element in the total income both under the old and new tax regime,” it says.
The maximum marginal rates to individuals stand at 42.744% under old and 39% under new tax regime, both of which are substantially higher compared to corporate tax rate as well as of other neighbouring countries, Assocham says.
