Central Budget 2025: Discussion on income tax reforms and relief for taxpayers intensifies…

Read Desk. The budget session will start from January 31 and continue till April 4. The government's tax policy for the next financial year will be eagerly awaited, which is expected to provide both short-term relief and long-term growth strategy.

Discussions are gaining momentum about possible income tax reforms and relief for taxpayers. Experts are speculating that the government may bring changes in income tax slabs and standard deduction limits to provide much-needed relief to individuals, boost consumption and support economic growth amid global uncertainties.

Major expectations for income tax reforms

Enhanced Standard Deduction Limit: Increase in standard deduction limit is a major expectation under the new income tax regime. Currently, salaried taxpayers can claim a standard deduction of ₹75,000. There is a possibility that the government may increase this limit to provide further relief to taxpayers, especially those with middle-level incomes.

adjustment in tax slab : Another important proposal under discussion is the adjustment of tax slabs under the new income tax system. Specifically, there are two possible changes:

Extension of 20% tax slab : The government may increase the 20% tax slab to cover income between ₹12 lakh to ₹20 lakh, making it more beneficial for middle-income earners.
Higher tax rate for high earners: For individuals earning more than ₹18 lakh or ₹20 lakh, the government may impose a 30% tax. This will affect the highest income earners while the middle income group people will get relief.

Existing tax slabs under the new tax system : As of now, the new income tax regime follows these slabs:

₹0 to ₹3,00,000: 0% tax
₹3,00,001 to ₹7,00,000: 5% tax
₹7,00,001 to ₹10,00,000: 10% tax
₹10,00,001 to ₹12,00,000: 15% tax
₹12,00,001 to ₹15,00,000: 20% tax
Above ₹15,00,001: 30% tax

Possible amendments and expected benefits : Ongoing discussions indicate that the Government of India is considering increasing the basic exemption limit from ₹3 lakh to ₹15,00,001. Under the new tax system, a limit of ₹ 5 lakh has been fixed. This will significantly reduce the tax burden on low income people.

Tax experts, including DK Srivastava, chief policy advisor at EY India, suggest that the government's focus should be on reducing personal income tax and allocating more capital expenditure to stimulate domestic growth, especially amid global economic uncertainties.

The new tax system will be more attractive: Many industry bodies and tax experts are optimistic that Budget 2025 will prioritize providing relief to taxpayers. The new tax regime is expected to be more attractive, which will boost consumption and economic activity, especially if the government chooses to revise the tax slabs and increase deductions.