With Union Finance Minister Nirmala Sitharaman set to present Budget 2025, taxpayers are eagerly anticipating reforms, particularly in the personal taxation sector. With no significant tax reforms seen in the past 10 years, the Modi government may deliver this time what has been on the minds of crores of taxpayers.
Taxpayers’ wishlist
1. Increase in Basic Tax Exemption Limit
Taxpayers are expecting an increase in the basic exemption limit from Rs 3 lakh to Rs 5 lakh under the New Tax Regime (NTR). This would ensure that individuals earning up to Rs 10 lakh benefit from lower tax rates and rebates, boosting disposable income.
2. Home Loan Benefits Under New Tax Regime
Currently, home loan deductions under Section 24B are only available under the Old Tax Regime. Taxpayers want these benefits to be extended to the New Tax Regime, allowing deductions on home loan interest payments and promoting homeownership.
3. Higher Standard Deduction for Salaried Individuals
The Standard Deduction was last raised to Rs 75,000 in Budget 2024. Taxpayers now seek an increase to Rs 1 lakh, which would help salaried individuals save more on taxable income.
4. More Tax Relief for Middle-Income Earners
With the 30% tax rate currently applicable for incomes above Rs 15 lakh, there is a growing demand for a new 25% tax slab for incomes between Rs 15 lakh and Rs 20 lakh. This would reduce the tax burden on middle-class earners.
5. Tax-Free Income Up to Rs 10 Lakh
If the basic exemption limit is raised to Rs 5 lakh, taxpayers want a 5% tax rate for incomes between Rs 5 lakh and Rs 10 lakh, effectively making income up to Rs 10 lakh tax-free after rebates.
6. National Pension System (NPS) Tax Benefits
Employees under the New Tax Regime are seeking deduction benefits on NPS contributions, similar to the Rs 2 lakh deduction under the Old Tax Regime. This would encourage more individuals to invest in retirement savings.
7. EPF Tax Benefits in NTR
With the upcoming EPFO 3.0 reforms, taxpayers expect the government to introduce tax deductions for EPF contributions under NTR, similar to the benefits available under Section 80C.
8. No Changes in Capital Gains Tax
After significant changes to capital gains tax in Budget 2024, taxpayers hope the government does not introduce further changes, ensuring stability for investors.
9. Clarity on Direct Tax Code (DTC)
The government announced a review of the Income Tax Act, 1961, last year, raising expectations for the Direct Tax Code (DTC). Taxpayers are looking for a clear roadmap on simplified tax structures.
10. Higher Rebate Under Section 87A
Currently, taxpayers earning up to Rs 7.5 lakh pay zero tax due to rebates. There is a demand to increase the rebate limit, ensuring more individuals benefit from tax-free earnings.
What Lies Ahead in Budget 2025?
With growing demands for tax relief, higher exemptions, and better savings incentives, all eyes are on FM Nirmala Sitharaman as she unveils Budget 2025. Whether these expectations will be met remains to be seen, but taxpayers are hopeful for a budget that reduces their tax burden and increases financial security.