New Delhi: Budget 2025 is just around the corner carrying a lot of expectations for a possible relaxation in taxation policies of the government. Finance Minister Nirmala Sitharama will be releasing the budget on February 1, 2025. As the speculations around tax relief keep on growing, some government officials claim that the upcoming Union Budget 2025-26 may see some notable changes in the new tax regime.
According to a Business Standard report citing government sources, this includes allowing an annual income of up to Rs 10 lakh to be tax-free and implementing a new 25% tax rate for incomes ranging from Rs 15 lakh to Rs 20 lakh. “We are evaluating both options. If our budget allows, we may implement both measures – making income up to Rs 10 lakh tax-free and introducing a 25 per cent slab for income between Rs 15 lakh and Rs 20 lakh,” the aforementioned government source told the publication. If this income tax relief is introduced, the source added that the government is ready to take on the revenue loss of Rs 50,000 crore to Rs 1 lakh crore resulting from this relief in income tax.
However, this is an either-or situation. Either the government is going to exempt the annual income of up to Rs 10 lakh from taxation or it is going to introduce a revised 25% tax bracket for an annual income lying in the range of Rs 15 lakh to Rs 20 lakh.
As per the current tax regime, annual income of above Rs 15 lakh is taxed at 30% while people with an annual income of up to Rs 7.75 lakh per annum have no tax liability with Rs 75,000 standard deduction.
The Global Trade Research Initiative (GTRI) has suggested increasing the tax exemption threshold to Rs 5.7 lakh, adjusted for inflation. It further proposed enhancing fixed deductions and exemptions, including increasing the Rs 10,000 deduction for savings interest to Rs 19,450 by 2025 and modifying the Rs 1.5 lakh deduction for insurance premiums and PF contributions to Rs 2.6 lakh. The think tank highlighted the necessity for tax brackets and exemptions adjusted for inflation to maintain the actual value of benefits for taxpayers.
