Finance Minister Nirmala Sitharaman is set to present the Union Budget 2025-26 on February 1, 2025, and the salaried class is keenly awaiting changes to income tax provisions. Government sources indicate possible major revisions, such as exempting annual incomes up to Rs 10 lakh from taxation or introducing a 25% tax slab for incomes ranging from Rs 15 lakh to Rs 20 lakh.
Options Under Consideration
Currently, incomes above Rs 15 lakh are taxed at 30%. The government is exploring two key options:
- Making annual income up to Rs 10 lakh tax-free.
- Introducing a 25% tax slab for incomes between Rs 15 lakh and Rs 20 lakh.
Officials suggest that both measures could be implemented, depending on budgetary allowances. This dual approach could result in revenue losses of Rs 50,000 crore to Rs 1 lakh crore, a trade-off the government is willing to make to boost urban consumption.
Expected Benefits of the Proposed Measures
Tax relief is expected to enhance disposable income, particularly for middle- and upper-middle-income groups. Analysts believe that individuals earning between Rs 15 lakh and Rs 20 lakh may contribute to increased consumption of durable goods, such as refrigerators and televisions, stimulating economic growth during a period of slowed GDP expansion.
Expert Opinions on Tax Regimes
Experts highlight the need to maintain flexibility between the old and new tax regimes. Akhilesh Ranjan, advisor at PwC, supports introducing the 25% slab for increased spending power. Similarly, Ankit Jain, a Partner at Ved Jain & Associates, emphasizes retaining the old regime for its allowances on actual expenses like rent, home loan repayments, and tuition fees.
While the government leans towards the new regime, tax professionals advocate for retaining the old system to accommodate diverse financial circumstances.
Conclusion
Union Budget 2025 could mark a transformative step for taxpayers, with measures designed to increase disposable income and drive economic growth. Whether the focus is solely on the new tax regime or includes the old system, taxpayers can expect significant relief and flexibility.
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