New Income Tax Slabs in Budget 2025 Highlights: Govt to introduce new income tax bill next week, says Sitharaman

Under the Faceless Assessment Scheme, taxpayers face operational challenges, such as the lack of grievance filing options, no provision for rectifications, and limited opportunities for early hearings with faceless Commissioners of Income Tax.

These inefficiencies contribute to prolonged litigation and tax revenue being locked in disputes. The Direct Tax Code (DTC) should address these concerns by introducing an operational framework to improve the functioning of the Faceless Assessment Scheme, aiming to reduce the backlog of pending appeals and enhance the overall efficiency of the tax assessment process.

Union Budget 2025: Filing tax returns for non-salaried taxpayers has become increasingly cumbersome due to the extensive information required in the forms. There is a strong need within the Direct Tax Code (DTC) to streamline these forms by simplifying the language and rationalizing the information requests.

Will there be again major changes in the capital gains tax framework like last year in the Budget to be presented shortly. The govt has simplified the categorization of assets for capital gains purposes, consolidating multiple holding periods into a single 24-month period, except for listed shares. However, the holding period for new assets under Section 54 of the Act remains at three years, which could be rationalized and reduced to 24 months. There is strong industry speculation that the government may increase the exemption limit for Long-Term Capital Gains (LTCG) on equities, currently set at INR 1.25 lakh, to INR 2 lakh or higher, allowing investors to retain a larger portion of their returns.

Budget 2025: Expectations are that the government may introduce a sunset clause for the old tax regime and slowly phase it out in favor of the new system. Such changes would not only make the new tax regime more taxpayer-friendly but also encourage savings and investments. By simplifying the tax structure, this shift could further support economic growth and enhance financial planning for individuals.

Under the existing tax regime, individuals earning up to INR 5 lakhs annually are exempt from paying taxes, while the new tax regime raised this threshold to INR 7 lakhs to offer more relief. There are expectations that the government will continue to enhance the new tax regime in Budget 2025 by increasing the basic exemption limit, adjusting tax slabs, and raising the standard deduction. After the adjustments in initial slab, an annual income up to Rs 10 lakh might not attract any tax under the new tax regime.

Taxpayers are hopeful that the standard deduction would be revised, especially in the new tax regime. The Finance Minister should consider raising the standard deduction to a minimum of INR 1 lakh per year, tax experts said.

Budget 2025: Salaried individuals have long been demanding some major tax breaks from the government. They are hoping for some relief from the tax burden on their salary income. Following the introduction of the New Tax Regime in recent years, the 2024 budget saw the Finance Minister announce an increased standard deduction of INR 75,000 per annum for those opting for the New Tax Regime, compared to INR 50,000 for those choosing the Old Tax Regime.

Taxpayers are expecting for the government to include House Rent Allowance (HRA) deductions for rental expenses under the New Tax Regime. This change would support individuals who do not receive housing benefits from their employers, enabling them to claim deductions for their rental costs.

Union Budget 2025-26: Tax experts want the government to include Section 80TTB, which would provide senior citizens with a deduction of up to INR 50,000 on interest income from deposits with banks, post offices, and similar institutions. This change would help ease the tax burden on retirees who rely on fixed-income sources, offering them much-needed financial relief in their post-working years.

Another major expectation from taxpayers from FM Nirmala Sitharaman is for Section 80D to extend the deduction limit for health insurance premiums to Rs 1 lakh for both self and family. With rising healthcare costs, this would offer much-needed financial relief to taxpayers.

Taxpayers are hoping for the inclusion of popular deductions under the New Tax Regime in Budget 2025. A key proposal is to allow Section 80C deductions up to INR 2 lakhs for life insurance premiums, employees’ Provident Fund contributions, and other similar savings. This would bring the NTR closer to the old tax regime, making it more appealing to those focused on long-term savings.

FM Sitharaman is expected to announce some big measures for central government employees and pensioners. Some of the key announcements could be around central government employees 8th Pay Commission outlay and implementation date; pension commutation in 12 years and new CGHS guidelines. Will Budget 2025 make these proposals a reality and bring more relief to employees, pensioners?

Taxpayers are looking for a simplifiied income tax slabs and rates in Budget 2025. One key points in their wishlist is increasing the basic exemption limit from INR 3 lakhs to INR 5 lakhs, which would provide greater relief to lower-income earners.

They also demand a new 25% tax rate slab that could benefit middle-income earners, while enhancing the income limit for the 30% slab from INR 15 lakhs to INR 20 lakhs would ease the tax burden on higher earners.

The introduction of the Old Tax Regime and New Tax Regime was meant to provide taxpayers with flexibility, allowing taxpayers to choose the system best suited to their investments and savings habits. However, this has led to confusion, with many reassessing their choice both throughout the year and when filing tax returns.

To address these complexities, the upcoming Budget could focus on simplifying the tax structure by consolidating the two regimes into a single framework. While this change may take time, it is expected that the OTR may be phased out by FY 2026-27, giving taxpayers and institutions ample time to adjust.

Taxpayers are hoping for the introduction of a specific allowance of up to Rs 50,000 under the new tax regime for upskill programmes. The proposal aims to encourage middle-aged taxpayers to invest in skill development, creating new employment opportunities and career growth prospects. By offering these deductions, the government could incentivize lifelong learning and help individuals adapt to a rapidly evolving job market.

In a move that could greatly benefit private sector employees, the government is reportedly considering a hike in the minimum monthly pension under the Employees’ Pension Scheme (EPS) to Rs 7,500. This proposal comes in response to persistent demands from EPS-95 pensioners, who currently receive a meager Rs 1,000 per month. If implemented, this increase would provide much-needed financial relief to retired employees and could mark a significant step in improving the welfare of those who have contributed to the scheme. Will Budget 2025 bring this change and offer a brighter future for EPS pensioners?

Ahead of the Union Budget 2025, central government employees are once again urging the Centre to reconsider the current 15-year waiting period for restoring commuted pensions. Currently, retirees’ commuted pensions are restored after 15 years from the commutation date. However, employees are demanding that the government reduce this period to 12 years. If this change is implemented, it could provide significant financial relief to retired employees, addressing a longstanding grievance. Will Budget 2025 bring the desired change to benefit these retirees?

After last year’s major announcements around the capital gains tax framework, all eyes will be on the FM how she goes about it this year. The Finance Act 2024 rationalized capital gains tax rates across asset classes and holding periods, while also withdrawing the benefits of indexation. This change led to higher tax liabilities for many taxpayers. In 2023, the Finance Act removed the long-term capital gains (LTCG) benefits for debt fund units purchased after April 1, 2023. Previously, LTCG from debt funds were taxed at 20% with indexation benefits.

As a result, debt mutual funds bought after April 1, 2023, no longer qualify for indexation benefits, and their capital gains are treated as short-term capital gains, taxed according to the investor’s income tax slab.

Taxpayers are demanding an increase in the basic exemption limit under the old tax regime, which has remained at Rs 2.5 lakh since the financial year 2014-15. Many believe that raising this limit to Rs 5 lakh would offer substantial relief to small taxpayers, providing them with more disposable income. This move could benefit the middle class, helping them manage rising living costs while contributing to overall economic growth.

Taxpayers demand that interest income from fixed deposits (FDs) should be taxed at the same rate as long-term capital gains (LTCG), which is 12.5% for other asset classes. They want a differentiated tax approach: interest income from FDs with a tenure of over 36 months should be taxed at 12.5%, while shorter-term FDs should continue to be taxed according to income tax slab rates. This change could encourage longer-term savings and provide more tax relief for FD investors.

Union Budget 2025 taxpayers’ expectations: Even as the government has been encouraging taxpayers to shift from the old tax regime with exemptions to the new, minimal exemptions structure, many still hope that Finance Minister Nirmala Sitharaman will introduce enhanced benefits under Section 80C in Budget 2025. Taxpayers are particularly looking for increased deductions to provide more relief, especially given the rising cost of living and the need for long-term savings incentives.

Union Budget 2025: Income taxpayers are hoping for further relaxation of tax slabs under the new tax regime. They believe that the highest 30% tax rate should apply only to individuals earning over Rs 20 lakh annually, instead of the current threshold of Rs 15 lakh.

With rising living costs and increasing tax burdens, taxpayers are hoping the government will ease the tax pressure and create a more equitable tax structure for middle-income earners.

In the last budget in July 2024, a key proposal was the removal of indexation benefits on certain assets. However, it was later tweaked for real estate sector. Now the mutual funds sector is hopeful for similar tax reforms, particularly the revival of tax relief for debt funds and the potential return of indexation benefits. Many investors and industry experts are optimistic that the government will address these concerns to enhance the attractiveness of debt investments.

In Union Budget 2025, middle-class taxpayers and salaried class are hoping that that there could be potential changes to the income tax structure, particularly the highest 30% tax slab. Currently applicable to individuals earning over Rs 15 lakh annually, this slab has been a topic of debate among taxpayers. The key question is whether the government will eliminate or modify the 30% tax rate in the upcoming budget.

Finance Minister Nirmala Sitharaman is expected to announce the official date for the implementation of the 8th Pay Commission as well as the outlay in the Union Budget 2025. The announcement comes after the Cabinet last month okayed the formation of the commission. With the anticipation building, all eyes are now on whether Budget 2025 will offer clarity on when the commission’s recommendations, based on which salary adjustments for government employees will be made.

Will central government employees get good news on DA arrears? They are hoping their long-awaited DA arrears for the COVID period will be addressed in Budget 2025. During the pandemic, the government froze three DA hikes for 18 months, from January 2020 to June 2021, due to financial constraints. As the financial situation improves, employees are now hoping the government will release these DA arrears. Will the Union Budget 2025 bring a positive update for these employees awaiting their dues?

The new tax regime offers a uniform standard deduction of Rs 75,000 across all income brackets. To ensure fairness between salaried and non-salaried individuals, experts suggest introducing progressive standard deductions based on a percentage of salary. Additionally, allowing selective deductions—such as those for health insurance, home loan interest, and life insurance — could make the new tax regime more appealing and beneficial for taxpayers.

Homebuyers with housing loans enjoy tax benefits under the Income Tax Act, but under the old tax regime. Section 24 allows a deduction of up to Rs 2 lakh on annual home loan interest, while Section 80C permits a Rs 1.5 lakh deduction on principal repayment. So Rs 2 lakh deduction benefits can be taken on home loans under the old regime.

Given rising home loan interest rates and property prices, tax experts propose increasing the Section 24 limit to at least Rs 5 lakh. They also suggest either raising the principal repayment cap under Section 80C or introducing a separate deduction for home loans to provide greater tax relief to borrowers. The government should also bringing the home loan benefits provision under the New Tax Regime.

The Modi government last time made changes in Section 80C of the Income Tax Act in 2014. That time the deduction limit was hiked to Rs 1.5 lakh from Rs 1.1 lakh under the Old Tax Regime. This section covers various financial commitments, including principal repayments on home loans, tax-saving fixed deposits, contributions to the Employees’ Provident Fund (EPF), children’s tuition fees, and life insurance premiums. Taxpayers are hopeful that as 72% ITRs have been filed under the new tax regime, the government will bring some of the tax deduction benefits of Section 80 C to the new regime as well. At the same time, who are still under the Old Tax Regime are expecting the government to hike the ceiling to Rs 2.5 lakh.

In this budget 2025-26, one area that needs FM’s attention is the simplification of the Tax Deducted at Source (TDS) process for property transactions and rental payments involving non-resident individuals. At present, homebuyers are required to deduct 1% TDS on property purchases exceeding Rs 50 lakh.