As the Union Budget approaches, different groups, including taxpayers, come up with high expectations every year. While some of their demands are addressed by the government, many remain unattended. More often than not, there’s a big gap between what the government delivers and what the people anticipate. In this context, we present our predictions for Budget 2025 — offering practical insights into what taxpayers can truly expect from Finance Minister Nirmala Sitharaman’s second full-fledged Budget in the Modi 3.0 regime.
Expectations are high among taxpayers that Budget 2025-26 may introduce some big-bang reforms on the personal taxation front. Key factors fueling these expectations include declining returns on small savings, high inflation eating into earnings and reducing disposable income, complexities due to the dual tax regime, and the absence of substantial tax relief for the middle class in the post-pandemic period.
However, our predictions for the Budget are carefully crafted without being swayed by the overhyped and often exaggerated wishlists circulating through various reports. Instead, the below predictions and expectations are based on real challenges and the current economic landscape. Take a look at key predictions for what Budget 2025 might bring in terms of personal taxation.
1. No changes again in Old Tax Regime tax structure and slabs
It is highly unlikely that the FM will make any significant changes to the Old Tax Regime, including the tax structures and slabs. The obvious reason behind this is that the tax department wants to further push the New Tax Regime. Data suggests that over 72% of taxpayers have already switched to the New Tax Regime, signaling a clear shift in preference. With this encouraging trend, the government is expected to focus on fine-tuning the new regime further to make it more attractive rather than making changes to the older structure, which it aims to phase out ultimately.
Having said that, though there might not be any announcements for taxpayers under the Old Tax Regime, it is not going away anytime soon. A complete phase-out is unlikely at least in this budget, as not all taxpayers are expected to transition to the new regime immediately. The government will probably take a call on doing away with the Old Tax Regime once at least 90% of taxpayers shift to the new regime.
This is crucial because about 44% of total tax collections come from individuals (11% of total actual taxpayers) earning between Rs 15 lakh and Rs 50 lakh.
» Read More
