Ahead of the Union Budget to be presented on February 1, 2025, taxpayers are anticipating significant changes aimed at simplifying tax laws. One key expectation is the fulfillment of promises made in the previous Budget to streamline tax provisions.

Reports suggest that the government is focusing on providing more examples and illustrations, making tax compliance easier for both taxpayers and tax administrators. The overarching goal remains reducing litigation and improving the ease of tax administration.

The government is also expected to make headway on simplifying the TDS (Tax Deducted at Source) regime. Currently, there are around 35 TDS provisions across various income tax sections, leading to confusion and administrative complexities.

Experts anticipate that the budget may introduce a reduction in the number of TDS rates, consolidating them into three or four categories to make compliance easier.

Additionally, there is speculation that low-rate TDS provisions, such as the 0.1% rate applied to e-commerce transactions, may be scrapped to eliminate administrative inefficiencies.

Dispute resolution

On the dispute resolution front, the government is likely to propose measures to tackle the growing backlog of tax cases. As of now, around Rs 12 trillion is locked in tax litigation, with more than 600,000 cases pending.

Efforts to establish a mediation or settlement mechanism for tax disputes are being discussed, which could help resolve issues at an early stage and reduce prolonged litigation.

In terms of tax collections, there is a possibility of slower growth in the coming months. While tax collections saw a boost this year, largely driven by rising personal incomes amid a booming market, this trend may not continue.

The increase in equity market activity has contributed to higher personal tax collections, but analysts warn that this surge could taper off, affecting overall revenue.