As India approaches the Union Budget for 2025, speculation is rife about potential changes to the income tax structure, particularly regarding the highest tax slab of 30%. This slab, which applies to individuals earning above Rs 15 lakh annually, has been a subject of debate among policymakers, economists and taxpayers.
The question on everyone’s mind is whether the government will eliminate or revise the 30% tax slab in the upcoming budget. While no official announcements have been made, several factors suggest that such a change could be on the horizon.
Arguments for Removing the 30% Slab 1. Boosting Disposable Income and Consumption
One of the primary arguments for removing or reducing the 30% slab is to increase disposable income for taxpayers. Higher disposable income could lead to increased consumption, which is crucial for economic growth. With private consumption accounting for nearly 60% of India’s GDP, any measure that puts more money in the hands of consumers could stimulate demand and drive economic activity.
Also Read: Budget 2025: Lower taxes to affordable housing, here’s what homebuyers want from this budget
2. Simplifying the Tax Regime
The government has been working towards simplifying the tax structure to make it more taxpayer friendly. The introduction of the new tax regime in Budget 2020, with lower rates but fewer deductions, was a step in this direction. Removing the 30% slab could further simplify the system, making it easier for individuals to understand and comply with tax laws.
Currently, with Rs 75,000 deduction in place, people earning up to Rs 7.75 lakh effectively don’t need to pay any tax. The expectation is to make this tax-free for income up to Rs 10 lakh. Industry experts feel that the taxation should be at 20% up to Rs 20 lakh, and for anyone earning beyond 20 lakh, there should be a tax slab of 25%.
Adhil Shetty, CEO of Banbazaar.com, says, “The data shows that the most new regime brackets have been enhanced by at least 20%, except one. The 30% slab is stuck at the Rs 15 lakh level since the start. If we update it by 20%, it needs to be at Rs 18 lakh. Without this update, taxpayers with higher income get burdened with a disproportionately higher share of the taxes.”
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