Budget 2025: 3 income tax changes by FM Nirmala Sitharaman that could benefit the middle class | Mint

As Budget 2025 draws near, middle-class taxpayers are looking forward to possible income tax revisions that could provide much-needed relief. In her eighth straight budget, will Finance Minister Nirmala Sitharaman make any announcements that will majorly impact the middle class by increasing their disposable income and promoting long-term financial growth? All eyes will be on Saturday, February 1, as the nation looks to see how the Budget addresses these key concerns.

3 income tax changes by FM Sitharaman that could benefit the middle class

1)Standard deduction

The standard deduction is a fixed sum that can be subtracted from taxable income—a larger deduction results in lower taxable income, which eventually lowers taxes.

Let’s use a straightforward example to try to grasp this: Suppose you earn ₹10,000,000 in gross pay. Your taxable income would be ₹9,25,000 after a standard deduction of ₹75,000. Your taxable income would be ₹9,000,000 if the standard deduction rose to ₹1,00,000.

“The government may consider some changes in the new tax regime. The standard deduction for salaried employees and pensioners, currently ₹75,000, could be increased to ₹1 lakh,” said Pankaj Mathpal, MD & CEO at Optima Money Managers.

2)Income tax rebate

A resident with an income not exceeding ₹7 lakh is eligible for a rebate under Section 87A of the Income Tax Act, effectively making income up to ₹7 lakh tax-free. “This limit may be increased by ₹1 lakh, raising the tax-free income threshold to ₹8 lakh,” added Mathpal.

3) New tax slabs

According to the MD & CEO at Optima Money Managers, the tax slabs in the new tax regime may also be revised as follows:

Income up to ₹4 lakh – Nil

₹4 lakh to ₹8 lakh – 5%

₹8 lakh to ₹10 lakh – 10%

₹10 lakh to ₹12 lakh – 15%

₹12 lakh to ₹15 lakh – 20%

These changes could make the new tax regime more attractive for taxpayers if implemented. He added that taxpayers could save more money, enhancing their disposable income.

Budget 2025: Making changes to old income tax regime unlikely

The government is focusing on making the new tax regime more popular, making changes to the old regime unlikely.

“As the government aims to make the new tax regime more popular, any changes in the old tax regime seem highly unlikely. Accordingly, an increase in deduction limits under sections 80C to 80U or section 24(b) (deduction on interest paid for home loans) is not expected,” said Mathpal.

Former Infosys CFO TV Mohandas Pai pointed out the mounting pressure on the middle class due to rising inflation, increasing EMIs, and soaring education costs. “The middle class is very angry and upset over high taxes and poor quality of life,” Pai stated in an interview with Mint.

Union Budget 2025

All eyes are on Finance Minister Nirmala Sitharaman as she gets ready to give her eighth Budget address on 1 February 2025, with the Union Budget 2025 rapidly approaching. In particular, the middle class and salaried people eagerly await relief and favourable improvements affecting their financial situation.

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Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before making any investment decisions.