Budget 2025: Income up to Rs.10 lakh would be Tax-Free and a New 25% Tax Slab likely to be announced

Union Finance Minister Nirmala Sitharaman is scheduled to announce the Union Budget 2025-2026 on February 1. Salaried taxpayers anxiously await rebates and tax cuts under both tax regimes in the annual budget.

In order to provide relief to taxpayers, the upcoming Union Budget 2025-2026 may include considerable changes to the new tax regime. These include making annually earned income of up to Rs.10 lakh tax-free as well as introducing a new tax slab of 25% for annual income of Rs.15-20 lakh, according to a report citing government sources.

Under the new tax regime, salaried taxpayers earning up to Rs.7.75 lakh per year basically have zero tax liability along with a standard deduction of Rs.75,000 in place. Income above Rs.15 lakh per year is subject to the maximum tax rate of 30%. The report says, the government is looking at changes.

“We’re considering both options. If our budget allows, we may adopt both measures – making income up to Rs.10 lakh tax-free and introducing a 25% tax slab for income ranges between Rs.15 lakh to Rs.20 lakh,” a government source told the publication.

He added that the government is ready to endure a revenue loss of Rs.50,000 crore to Rs.1 lakh crore as a result of such income tax relief.

Additionally, the Global Trade Research Initiative (GTRI) has proposed considerable tax changes for the Union Budget 2025-26.

The organisation proposed increasing the income-tax exemption level to Rs.5.7 lakh, adjusted for inflation.

The GTRI also advocated raising fixed deductions and exemptions, such as hiking the Rs.10,000 deduction for savings interest to Rs.19,450 by 2025 and revising the Rs.1.5 lakh deduction for insurance premiums and PF contributions to Rs.2.6 lakh.

The organisation underlined the need of inflation-indexed tax slabs and exemptions in preserving the actual value of taxpayer benefits.

Most market experts expect that, unlike last year, Finance Minister Nirmala Sitharaman will not surprise investors with a capital gains tax hike this year. They also predict that, while the government may consider some tax measures to stimulate consumption at a time when GDP has slowed, the budget will have little influence as a catalyst for boosting growth or earnings.