Experts have speculated that the Indian government may make significant tweaks to the current new tax regime, with the initial tax slab of Rs. 0-3 lakh potentially being expanded to Rs. 0-5 lakh. The move, which is expected to be part of the Union Budget 2025-26, aims to provide greater relief to taxpayers in the middle-income bracket.
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- According to experts, the revised tax structure will keep other tax slabs largely the same, with the following proposed breakdown:
- 0-5 Lakh: 0% tax rate.
- 5-10 Lakh: 10% tax rate.
- 10-12 Lakh: 15% tax rate.
- 12-15 Lakh: 20% tax rate.
- 15-20 Lakh: 25% tax rate.
- Above 20 Lakh: 30% tax rate.
Impact on Taxpayers
- Middle-Class Relief: The most significant change would be the increase of the non-taxable income limit from Rs. 3 lakh to Rs. 5 lakh, directly benefitting millions of low- and middle-income taxpayers. Experts predict that this revision will provide financial relief and potentially increase disposable income, enabling greater consumer spending.
- Tax Burden for Higher Income Brackets: The tax burden for individuals earning between Rs. 5 lakh to Rs. 20 lakh will remain largely unchanged, maintaining the current structure with slight adjustments in compliance for higher-income earners.
Economic Implications
- Short-Term Revenue Effects: While the tweak in the lower tax slab may lead to a reduction in revenue generation for the government in the short term, experts suggest that it could stimulate economic activity through higher consumer spending.
- Long-Term Growth: The change could have a positive impact on economic growth by increasing the purchasing power of taxpayers and encouraging more investments in the economy.
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Looking Ahead: Experts anticipate that these changes, if implemented, will be a significant step toward a more taxpayer-friendly structure, although the final details will depend on the official announcement in the upcoming budget. These potential changes reflect the government’s ongoing efforts to adjust tax policies to the evolving economic landscape.
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