Budget 2025: Before the Union Budget 2025-26 is released, people are expecting that this time there can be some big announcements of tax relief. DK Srivastava, Chief Policy Advisor of EY, has emphasized on the need to address domestic priorities in this budget. He said that reducing personal income tax and increasing capital expenditure is necessary for economic growth amid global uncertainties.
When Finance Minister Nirmala Sitharaman will present the Union Budget on January 1, then it will be known what the government plans to do. But the speculation is that there can be some major changes in the income tax structure. According to reports, steps can be taken to gradually phase out the old tax regime and make the new regime more attractive.
Possible Steps for Tax Relief
According to a report by CNBC-TV18, the government is focusing on giving tax relief, which will boost consumption and economic activity. There are talks that relief can be given by increasing standard deductions or adjusting tax slabs in the new tax regime.
Option 1: Increase Standard Deduction Limit
Currently, under the new tax regime, salaried taxpayers can claim a standard deduction of ₹75,000. According to a proposal, this limit could be increased further, which will provide more relief to middle-class taxpayers.
Option 2: Change in Tax Slabs
The second proposal is to revise tax slabs. According to reports, the government is considering increasing the 20% tax slab from ₹12 lakh to ₹18 lakh or ₹20 lakh. In this scenario, the 30% tax rate will be applicable only on income above ₹18 lakh or ₹20 lakh.
The tax slabs of the new tax regime are as follows:
• ₹0 to ₹3,00,000: 0%
• ₹3,00,001 to ₹7,00,000: 5%
• ₹7,00,001 to ₹10,00,000: 10%
• ₹10,00,001 to ₹12,00,000: 15%
• ₹12,00,001 to ₹15,00,000: 20%
• Above ₹15,00,001: 30%
If the slab limit of 20% is increased, the overall tax liability of taxpayers will be reduced, which will help in saving and spending. I will encourage you.
What do experts say
Tax experts and industry bodies feel that the government will revise tax slabs and rates so that taxpayers get more money. EY India has suggested that the basic exemption limit be increased from ₹3 lakh to ₹5 lakh. Also, there has been talk of reducing tax rates in the new system.
DK Srivastava said that it is important to prioritize domestic economic factors. According to him, reducing personal income tax and allocating more funds for capital expenditure will be important for growth.
Future of Old Tax Regime
Reports are also saying that the government can give a roadmap to gradually phase out the old tax regime. It will be made more advantageous for taxpayers to shift to the new regime, so that the tax system is simplified and complexities are reduced.
Key Takeaways
Major tax reforms are expected from Union Budget 2025. The government is working to make the new income tax regime more attractive, which will boost economic activity along with providing relief to taxpayers.
Measures like increasing the standard deduction limit and revising tax slabs can be beneficial for taxpayers. Now all attention will be on official announcements, which will show how these changes will impact the financial planning of taxpayers.
