“Budget 2025: Speculation Centers around Possible Modifications to Tax Slabs, New Relief Measures, and Strong Demand for Increased Exemptions and Deductions”
Budget Expectations 2025: Taxpayers Hope for Relief
Finance Minister Nirmala Sitharaman will present the Union Budget on February 1, 2025, a highly awaited event for taxpayers across India. The income tax section is of particular interest, as people eagerly anticipate any changes that could ease their tax burden.
There is widespread speculation about possible changes to tax slabs and new relief measures. Many taxpayers are hoping for increased exemptions and deductions. There is especially strong demand for adjustments to income tax slabs to reduce the burden, particularly for those at both the lower and upper ends of the income scale.
A key expectation is the revision of income tax slab rates, with many calling for an expansion of the 30% tax bracket, currently applicable to income above Rs 15 lakh.
Ernst & Young India (EY India) has suggested the government increase the basic exemption limit in the new tax regime from Rs 3 lakh to Rs 5 lakh, along with reducing tax rates.
In a post on X, TV Mohandas Pai, former CFO of Infosys, also urged Prime Minister Modi and Finance Minister Sitharaman to adjust tax slabs to provide relief to the middle class.
Tax Relief and Deductions Expected in Budget 2025
According to Niyati Shah, Vertical Head of Personal Tax at 1 Finance, the middle class should receive some relief, as they are paying significantly more taxes compared to other segments. Shah suggests that with the application of revised tax slabs, savings could reach up to Rs 5 lakh under the old tax regime and about Rs 4.34 lakh under the New Tax Regime.
“Middle-class taxpayers have faced a sharp increase in income tax contributions, nearly doubling in the last three years. For example, a salaried individual earning Rs 25 lakh with deductions under Section 80C (Rs 1.5 lakh), 80D (Rs 25,000), and 80CCD (1B) (Rs 50,000) would have a tax liability of Rs 4,99,200 under the old regime. The new regime offers only modest relief, lowering the liability to Rs 4,34,200. However, a simplified tax slab structure, such as no tax up to Rs 5 lakh, 10% tax for income between Rs 5–10 lakh, and 20% tax for Rs 10–20 lakh, would reduce the tax liability to Rs 3,47,500. This would save Rs 1,51,700 under the old regime and Rs 86,700 under the new regime. A fairer system is essential to address middle-class concerns and ensure equitable growth,” said Shah.
Budget 2025 Expectations: Tax Reforms
Increase Section 80D deductions to Rs 50,000 for individuals and Rs 1,00,000 for senior citizens to promote health insurance adoption.
Raise home loan interest deductions under Section 24(b) from Rs 2 lakh to Rs 3 lakh to encourage investment in real estate.
Update the Section 80C limit from Rs 1.5 lakh to encourage investments in tax-saving instruments like Public Provident Fund (PPF) and tax-saving fixed deposits.
Extend the 15% concessional tax rate for new manufacturing units beyond March 2024 to support Make-in-India initiatives.
Propose higher exemption limits for senior citizens and recommend reducing tax rates for individuals and Limited Liability Partnerships (LLPs) to 25%, aligning them with corporate rates.