Budget 2025: Income up to Rs 10 Lakh to be tax-free, new 25% tax slab expected, says report
Union Budget 2025: Will Sitharaman Announce Major Tax Cuts for Salaried Class?
Union Finance Minister Nirmala Sitharaman is scheduled to present the Union Budget for 2025-2026 on February 1. In a move to provide relief to taxpayers, the upcoming Union Budget 2025-2026 may introduce notable changes to the new tax regime. These potential changes include making annual income up to Rs 10 lakh tax-free and introducing a new 25% tax slab for incomes between Rs 15 lakh and Rs 20 lakh, according to Business Standard, citing government sources.
Salaried taxpayers are eagerly anticipating potential rebates and tax reductions under both the old and new tax regimes in the annual budget.
Under the current new tax regime, salaried taxpayers earning up to Rs 7.75 lakh per annum effectively have no tax liability, thanks to the Rs 75,000 standard deduction. Income exceeding Rs 15 lakh per annum is taxed at the highest slab of 30%. A report by Business Standard suggests that the government is considering potential changes to the tax structure.
A government source stated, “We are evaluating both options. If the budget permits, we may implement both measures – making income up to Rs 10 lakh tax-free and introducing a 25% tax slab for incomes between Rs 15 lakh and Rs 20 lakh”. He also mentioned that the government is prepared to absorb a revenue loss ranging from Rs 50,000 crore to Rs 1 lakh crore as a result of these income tax reliefs.
The Global Trade Research Initiative (GTRI) has recommended substantial tax reforms ahead of the Union Budget 2025-26. The think tank suggested raising the income tax exemption threshold to Rs 5.7 lakh, adjusted for inflation. GTRI also proposed increasing fixed deductions and exemptions, including raising the Rs 10,000 deduction for savings interest to Rs 19,450 by 2025 and adjusting the Rs 1.5 lakh deduction for insurance premiums and PF contributions to Rs 2.6 lakh. The think tank stressed the importance of inflation-indexed tax slabs and exemptions to maintain the real value of benefits for taxpayers.
Most market experts believe that, unlike last year, Finance Minister Nirmala Sitharaman will not surprise taxpayers with an unexpected increase in capital gains tax this year. While they anticipate that the government may introduce tax measures to stimulate consumption amid a slowdown in growth, they expect the budget to have a limited effect in terms of catalyzing a significant revival of growth or earnings.
