Proposals under review as Union Budget 2025 announcement nears

Government is considering tax reforms that could benefit the salaried class, especially middle-income earners, by increasing disposable income and encouraging higher consumer spending

Finance Minister Nirmala Sitharaman is scheduled to present the Union Budget 2025 on February 1, with significant expectations surrounding potential changes to the income tax regime. Amid slowing economic growth, the government is considering tax reforms that could benefit the salaried class, especially middle-income earners, by increasing disposable income and encouraging higher consumer spending. These Budget 2025 discussions have sparked widespread interest, particularly regarding potential income tax exemptions and new slabs.

Potential tax exemptions and new slab proposals

Government sources have reportedly indicated that the budget planning for 2025 may include major changes to the income tax structure. One proposal under consideration is to exempt annual incomes up to ₹10 lakh from taxation, which would provide considerable relief to individuals in the middle-income bracket. Additionally, a new 25% tax slab for incomes between ₹15 lakh and ₹20 lakh is also being explored. Presently, individuals earning above ₹15 lakh are taxed at the highest rate of 30%.

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“We are considering both options—exempting income up to ₹10 lakh from taxes and introducing a 25% tax bracket for individuals earning between ₹15 lakh and ₹20 lakh,” said a government source, as per reports. If implemented, these changes could result in significant savings for taxpayers and contribute to stimulating urban consumption, particularly in durable goods like electronics and home appliances.

Despite the potential revenue loss of ₹50,000 crore to ₹1 lakh crore, these tax reforms are seen as an investment in economic recovery. Experts suggest that the increased disposable income could boost demand and counterbalance the slowdown, especially as GDP growth dipped to 5.4% in Q2FY25, marking the lowest growth rate in seven quarters.

Key debate unfolds over Old vs. New tax regime

While the new tax regime has garnered attention for simplifying tax payments, some experts argue that the old tax structure should remain a viable option. Ankit Jain, a partner at Ved Jain & Associates, advocates for keeping the old tax system, which allows for deductions on expenses like home loan repayments and medical bills. “The old regime provides greater flexibility, especially for taxpayers with significant financial obligations,” Jain pointed out.

As the India Budget date 2025 draws near, many are awaiting the government’s decision on whether it will prioritize the new tax regime or retain the old system to accommodate a broader range of taxpayer needs. With the 2025 budget date fast approaching, these Union Budget proposals will be pivotal in shaping India’s financial landscape in the coming years, and the government's decisions could have far-reaching impacts on both the economy and individual taxpayers.