Tax buoyancy is likely to go down in FY25: Emkay

Declining tax buoyancy: Tax buoyancy to come off from the levels that existed in FY24. “We estimate gross tax revenue growth at 10 per cent (after a robust expected growth rate of >11 per cent in FY24E),” the pre-budget note said. 

According to Emkay, Tax buoyancy is likely to come off with the normalizing economic cycle, but the Centre’s tax/GDP will stay healthy at 11.4 per cent, against 11.5 estimated for FY24, higher than the average seen in a few pre-pandemic years, amid the improving compliance-led tax base.

Corporate Tax 

Emkay also expects corporate taxes to grow at 10 per cent YoY (3.2 per cent of GDP), also helped by an earnings growth estimate of 13-14 per cent for the Nifty-50, as per consensus estimates for the year ahead.  

“In line with the further rationalization of the direct tax code, the income slabs could be tweaked for tax rebates (which has been happening since the past couple of Budgets),” the note read. 

The tweaks around the new tax regime to incentivize more people shifting may be in the offing, although such changes may be introduced in the full budget post-elections. 

Additionally, there may be tweaks to the old tax regime as well; some of the possible changes are:  Increasing the threshold for the highest marginal tax bracket (30 per cent) in the new tax regime to Rs2,000,000 from Rs1,500,000 currently  Reducing the highest marginal tax rate to 25 per cent from 30 per cent (both regimes)  Increasing the rebate in the old tax regime to Rs 700,000, to match that of the new tax regime