Tag: middle class in budget 2025

Empowering Women Through Property Ownership: ICAI Proposals for Budget 2025

Budget 2025 Anticipations: The Institute of Chartered Accountants of India (ICAI) has put forward a proposal for the government aimed at promoting property ownership among women throughout the nation.

In its pre-budget submission to the government, ICAI highlighted that it is a common practice for many Indian families to register property in women’s names. Several state governments have also introduced incentives for registering property under women’s names by offering lower stamp duty rates.

Nonetheless, according to ICAI, two specific provisions of the Income-tax Act, 1961, hinder women’s property ownership.

1. Deemed ownership of property

Under section 27(i) of the Income-tax Act, 1961, an individual who transfers property to their spouse is automatically considered the owner of that property.

ICAI pointed out that “the provision under section 27 serves as a barrier by deeming the transferor-spouse as the owner.”

Additionally, it dissuades individuals from gifting or transferring property to their spouse unless in certain cases:

“This restrictive provision discourages individuals from transferring property to their spouse, thus undermining the advantages of stamp duty reductions provided by state governments,” ICAI stated.

2. Clubbing of income

The overall income of an individual incorporates income from any property that has been transferred, directly or indirectly, to the spouse due to the clubbing of income regulation under section 64(1).

Recommendations from ICAI

ICAI emphasized that granting property ownership rights to women could be a pivotal move toward empowering them and improving their economic status.

Consequently, it has proposed that Budget 2025 should abolish the restrictive deemed ownership clause under section 27 and the clubbing regulations outlined in section 64(1)(iv)/(vi). This change would promote property ownership among women.

Joint Taxation for Married Couples

Furthermore, ICAI has suggested that the government should facilitate joint taxation for married couples by introducing consolidated tax slabs within the new tax regime. This approach would benefit families with a single income earner.

Income Tax Relief: Govt Considers Cuts For Rs 15 Lakh Salary Bracket

The government is thinking of reducing income tax for people who earn up to Rs 15 lakh per year, said Reuters in a report. This move can benefit millions of taxpayers, especially living in urban areas. The upcoming Union Budget 2025-26 may provide relief to the middle class and boost consumption, Reuters cited government sources. According to the report, millions of people could benefit from this move if they choose the 2020 tax system, which does not allow certain exemptions like housing rent deductions.

Under that system, income between Rs 3–15 lakh was taxed at 5-20%, with income higher than that drawing 30%.

Here’s how the new tax system works:

  • Income up to Rs 3 lakh: 0% tax
  • Rs 3–7 lakh: 5% tax
  • Income up to Rs 7–10 lakh: 10% tax
  • Rs 10–12 lakh: 15% tax
  • Rs 12–15 lakh: 20% tax
  • Income Above Rs 15 lakh: 30% tax

Indian taxpayers now have a choice between these two different tax systems.

Other details of these two tax options:

  1. Old plan: You can claim exemptions on rent and insurance.
  2. New plan (2020): Lower tax rates, but fewer exemptions. It’s simpler.

Income Tax Relief: What Else We Know?

The government hasn’t yet decided how much to cut taxes, said the report. Moreover, a decision may be made closer to the budget announcement on February 1. Meanwhile, most of India’s income tax comes from individuals who earn Rs 10 lakh or more, which is taxed at a rate of 30%. Furthermore, India’s economy, which is the fifth-largest in the world, grew at its slowest pace in seven quarters (July-September).

Experts say that to boost the economy, increasing middle-class income could help. However, high food prices are hurting demand for many goods, from basics like soap and shampoo to cars, especially in cities. In current time, government is facing pressure from the middle class, who feel they are paying too much in taxes, said the report.

Preparing for Budget 2025: A Focus on Urban Consumption and Middle-Class Relief

The Finance Ministry has commenced preparations for Budget 2025, set to be announced in two months. Expected to provide relief to the Indian middle class, the budget will likely emphasize urban consumption.

Tax breaks may be introduced, along with adjustments in tax slab rates, granting more disposable income to urban and semi-urban populations. A pivotal aspect of the budget will include supporting employment-generating sectors, particularly MSMEs, to stimulate urban economic activity.

Meetings regarding Budget 2025 began last week, focusing on taxation, including discussions on tobacco products. The ministry has formed broad thematic teams to streamline major schemes in line with these objectives.

In contrast, the Union Budget 2024, presented by Finance Minister Nirmala Sitharaman, predominantly targeted the poor, women, youth, and farmers. Key aspects included increased public spending, job creation initiatives, and measures aimed at assisting the middle class.

Noteworthy tax changes included an increase in the standard deduction under the New Tax Regime from Rs 50,000 to Rs 75,000. The budget also established a NIL tax rate for incomes up to Rs 3 lakh and a 5% rate for incomes ranging from Rs 3 lakh to Rs 7 lakh.

Additionally, the short-term capital gains tax rose from 15% to 20%, while long-term capital gains tax was elevated to 12.5%. Overall, Budget 2024 focused on inclusive growth and strengthening the economic resilience of various demographics.