Budget 2025: How can Government bring relief to Taxpayers?

The Union Budget 2025 is nearly around the corner, and citizens have great expectations for income tax relief.

Though experts have stated that large tax relief are doubtful in the budget, people are still hoping for some modest improvements that will increase disposable income, considering that the government is also aiming to encourage consumption.

A professional in taxation said that, “new tax incentives for affordable housing might provide relief to first-time homebuyers and stimulate the real estate sector.”

The country’s large middle-class population is also urging the inclusion of tax-saving measures and deductions in the new income tax regime.

Currently, the new income tax regime has reduced tax slabs and a basic deduction of Rs.75,000, which is Rs.25,000 higher than the old tax regime’s Rs 50,000.

However, the new tax regime misses the benefit of important deductions that made the old tax regime popular among paid taxpayers in the country, particularly those with home loans.

The government can also consider rationalizing capital gains taxation, which will benefit both investors and the whole economy. However, this appears improbable considering that an announcement on the subject was made in the preceding budget.

It is believed that taxes expectations revolve around rationalizing capital gains tax in order to simplify compliance and stimulate greater market participation.

While there has been some talk about lowering the Securities Transaction Tax (STT), this appears unlikely given the government’s focus on revenue.

On the contrary, individual taxpayers may receive targeted relief in the form of increased deductions under Section 80C and potential changes to the new tax regime to encourage spending.