Budget 2025 Taxpayers’ Expectations: Finance Minister Nirmala Sitharaman will be presenting the Union Budget 2025-26 on February 1, 2025. Tax experts and taxpayers are hopeful that the government will be announcing some significant tax breaks for lower and middle-class taxpayers to give them some relief from inflation.
In the last Union Budget 2024-25, FM Sitharaman announced some more benefits for taxpayers under the new tax regime like an increase in standard deduction limit, revised tax slabs, and a rise in family pension deduction.
New Tax Regime: Key benefits
The New Tax Regime offers a higher tax-free income threshold, fewer deductions, and a simplified filing process. With minimal deductions and exemptions, taxpayers are no longer burdened with providing proof for claims. The tax-free income limit has been set at Rs 7.75 lakh.
For Assessment Year 2024-25, nearly 72% of the 9 crore income tax returns were filed under the New Tax Regime. Of these, over 70% reported taxable income of Rs 5 lakh or less, resulting in zero tax liability. Additionally, 88% of filers reported income below Rs 10 lakh, while 94% reported income under Rs 15 lakh. So, data shows that 9 in 10 taxpayers are either in a no-tax or a low-tax bracket.
Also read: Budget 2025: Govt may replace Income Tax Act, 1961 with THIS new law! What it means for taxpayers
With the government aiming to further increase the 72% of taxpayers currently under the New Tax Regime, tax experts recommend introducing more incentives and tax breaks to encourage more individuals to switch to it. One key suggestion is to raise the exemption limit to Rs 10 lakh, meaning individuals earning up to Rs 10 lakh annually would not have to pay any income tax.
As the government works to increase the percentage of taxpayers under the New Tax Regime, tax experts suggest introducing more incentives and relief measures to attract individuals. A key proposal is raising the basic tax exemption limit to Rs 10 lakh, which would mean individuals earning up to Rs 10 lakh annually wouldn’t have to pay any income tax.
Experts’ take on possible tax reliefs and rationalisation
Vimal Nadar, Senior Director, Research, Colliers India, highlights the need for rationalising tax slabs to make the New Tax Regime more appealing.
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