As the Finance Minister is set to present the Union Budget on 1st February for the upcoming financial year of 2025-26, the middle-class people of the country are eyeing some tax benefits and a reduction in tax slabs.
There is anticipation that the government will bring some relief for the working class in the Income Tax system.
The basic exemption limit may be raised from ?3 lakh to ?5 lakh, The Times of India reported. This adjustment would reduce the tax liability for individuals with annual incomes up to ?5 lakh, providing relief for low- and middle-income households.
Vimal Nadar, Senior Director of Research at Colliers India, said to The Mint that Indian taxpayers are slowly moving to the new tax regime by choice. He emphasised the need to adjust tax slabs since there are fewer deductions and incentives available.
There is speculation about the introduction of a 25 per cent tax slab for individuals earning between ?15 lakh and ?20 lakh annually. This change is expected to offer significant tax relief and increase disposable income, potentially boosting consumption. Moreover, the plan to exempt income tax for earnings up to ?10 lakh will increase liquidity for middle-class salaried individuals.
The standard deduction for salaried individuals and pensioners may be increased from ?75,000 to ?1 lakh. This change would further reduce taxable income, providing additional financial relief.
There is speculation that the government might raise the tax rebate limit under Section 87A to ?7 lakh. This would allow individuals with taxable incomes up to this threshold to pay no income tax. Additionally, deductions under sections like 80C (for investments) and 80D (for health insurance premiums) could be increased to encourage savings and investments.
There are expectations that the government may introduce other key measures in the upcoming budget. The government may introduce alternative funding methods for infrastructure projects, such as Tax-Free Bonds and Tax-Paid Bonds, to lower financing costs and boost development.
A comprehensive revamp of Tax Deducted at Source (TDS) provisions is anticipated to simplify compliance and reduce litigation, The Hindustan Times reported. This may include a single comprehensive schedule of rates and the withdrawal of TDS/TCS certificates to ease compliance burdens.
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