Income Tax Budget 2025: Will Nirmala Sitharaman offer solace to taxpayers with higher exemption limits, revised slabs? | Mint

Income Tax Budget 2025: The Union Budget in July 2024 disappointed individual taxpayers with limited changes. Now, the salaried class are keenly awaiting whether the upcoming Budget 2025 will deliver the much-needed tax relief to alleviate mounting financial pressures. The emloyeed class expects relief in the budget on tax costs they bear on their salary income.

1) Income tax slabs

Reports suggest that the government may raise the tax-free annual income limit to ₹10 lakh, offering relief to the salaried class and revitalising the economy.

“The govt should lower the income tax rates for individuals earning up to ₹15 lakh annually. This can increase the overall disposable income and boost consumption,” said Shefali Mundra, a tax expert at ClearTax.

Budget 2025 Expectations LIVE

2)Raising exemption limit, simplification of income tax slabs

Calls for simplifying the current complex tax slab structure are growing. Suggestions include increasing the basic exemption limit to ₹5 lakh.

Deepashree Shetty, Partner at BDO India, recommends introducing a new 25% tax slab to offer additional relief to middle-income earners. The tax rates are 5%, 10%, 15%, 20%, and 30%. She also suggests increasing the income threshold for the 30% tax rate from ₹15 lakh to ₹20 lakh.

3) Unified tax regime

Experts anticipate reforms like a unified tax regime and enhanced deductions to encourage savings. The current dual regime (Old Tax Regime and New Tax Regime) has created confusion, prompting calls for a single, cohesive framework.

“There is a strong expectation that the government will focus on improving taxpayers’ savings by introducing reforms such as a unified tax regime and enhanced deductions. In light of these complexities, the upcoming Budget should focus on simplifying the tax structure for individual taxpayers by consolidating the current dual regimes into a single, cohesive tax framework,” said Deepashree Shetty, Partner, Global Employer Services, Tax & Regulatory Services, BDO India. 

She acknowledges that this shift may take time and anticipates the old tax regime may be eventually be phased out, with its abolition ideally scheduled for FY 2026-27. The idea is to provide ample time for taxpayers, employers, and financial institutions to adjust, she said.

“The government is expected to further enhance the new tax regime by increasing the basic exemption limit, adjusting tax slabs, and raising the standard deduction. Additionally, there is speculation that the Government may introduce a sunset clause for the old tax regime, gradually phasing it out in favour of the new system,” said Aakash Uppal, Partner & Leader (North & East), Corporate Tax, Tax and Regulatory Services, BDO India

4) Capital Gains tax

There is a strong expectation that the exemption limit for Long-Term Capital Gains (LTCG) on equities, currently set at ₹1.25 lakh, may be increased to ₹2 lakh or higher, which would allow investors to retain a more significant portion of their returns “The holding period for new assets under section 54 of the Act remains three years, which could be rationalized and brought down to 24 months,”  Aakash Uppal, Partner & Leader (North & East), Corporate Tax, Tax and Regulatory Services, BDO India, suggested.

Finance Minister Nirmala Sitharaman is scheduled to present the budget on 1 February. President Droupadi Murmu will address a joint parliamentary session on January 31 to kick off the budget session, which will end on February 13. The Economic Survey will be presented on 31 January 2025.

Disclaimer: The views and recommendations made above are those of individual analysts and not of Mint. We advise investors to check with certified experts before making any investment decisions.