Budget 2025: Major Income Tax Benefits to expect from Union Budget 2025

As the Finance Minister Nirmala Sitharaman prepares to propose the Union Budget for the financial year 2025-26 on February 1st, the country’s middle class is hoping for major relief from taxes and reductions in tax brackets.

There is hope that the government would provide some relief to the working class through the income tax system.

Basic Exemption Limit may be increased to Rs.5 lakh

The basic exemption limit may be increased from Rs.3 lakh to Rs.5 lakh, as reported. This changes will cut tax liabilities for those with yearly incomes up to Rs.5 lakh, benefiting low- and middle-income households.

A expert said that Indian taxpayers are gradually voluntarily moving to the new tax regime. He underlined the necessity of changing tax brackets as there are fewer exemptions and incentives available.

Tax Slab of 25%

There is discussion about the introduction of a 25% tax rate slab for persons earning between Rs.15 lakh to Rs.20 lakh yearly. This measure is likely to provide significant tax relief and increase disposable income, thereby driving up consumption. Exempting income tax for incomes up to Rs.10 lakh should be consider as it will benefit middle-class salaried individuals, increasing their liquidity.

The standard deduction under new tax regime for salaried individuals and pensioners could increase from Rs.75,000 to Rs.1 lakh. This modification would significantly lower taxable income, resulting in more financial relief.

Increase the Tax Rebate Limit

It is speculated that the government may increase the limit of tax rebate under Section 87A to Rs.7 lakh. Individuals having taxable incomes up to this amount would not be required to pay income tax. Furthermore, deductions under sections 80C (investments) and 80D (health insurance premiums) could be enhanced to encourage more savings and investments.

Apart from tax rebate limit, there are expectation that the government would include other crucial measures in the upcoming budget. To reduce financing costs and promote growth, the government may implement alternate funding options for infrastructure projects, such as Tax-Free Bonds and Tax-Paid Bonds.

Simplified TDS Provisions

A complete overhaul of Tax Deducted at Source (TDS) norms is expected to ease compliance and reduce litigation, according to reports. This could include a single comprehensive rate schedule and the elimination of TDS/TCS certificates to reduce compliance obligations.