As the Union Budget 2025 draws near, there’s a growing buzz about potential changes in income tax policies for the common man. Experts have offered several recommendations focussing on significant changes to personal income tax, specific tax areas like EVs and crypto, housing benefits, savings incentives, and more. These proposed reforms aim to provide relief to the taxpayers.
Here’s a list of income tax reforms that the middle class can expect from the budget:
Changes in income tax slabs: The government should consider revising tax slabs to provide relief to middle-class taxpayers by potentially reducing individual income tax rates.
Address inflation by increasing the exemption limit under the income tax regime. A rise to ₹4 lakh is essential, while many taxpayers hope for a ₹10 lakh limit," said Abhishek Soni of Tax2Win.
"The government should lower the income tax rates for individuals earning up to ₹15 lakh annually. This can increase the overall disposable income and boost consumption," said Shefali Mundra, a tax expert at ClearTax
Home loan benefits in the new tax regime: Experts suggest that Nirmala Sitharaman should encourage homeownership by offering benefits under the new tax system, even if they are lower than under the old tax regime.
Incentives for homeowners: “Homebuyers may benefit from higher interest deduction limits on housing loans under Section 24(b). The deduction should be allowed for the full interest paid, at least for one house, or the current limit of Rs. 2 lakh should be increased to Rs. 3 lakh,” said Dhruv Chopra of Dewan P.N. Chopra & Co.
Higher NPS deductions: Abhishek Soni recommends increasing the additional NPS deduction limit from ₹50,000 to ₹1,00,000 and making withdrawals fully tax-free (EEE treatment).
HRA for Tier-2 cities: To ensure equitable treatment for taxpayers residing in high-cost urban centres, Soni recommends extending the 50% HRA exemption category to cities such as Hyderabad, Pune, and Bengaluru.
Reforms under Section 80D: Noting the growing health concerns, Shefali Mundra suggested that the tax deduction limits under Section 80D be increased to ₹50,000 for individuals and ₹1,00,000 for senior citizens, from ₹25,000 and ₹50,000, respectively.
Defer TDS on Provident Fund (PF) interest: Abhishek Soni recommends deferring tax deduction on interest exceeding ₹2.5 lakh until withdrawal to improve taxpayer cash flow.
Capital Gains Tax: Niranjan Govindekar, a tax expert at BDO India, thinks some changes from the 2024 budget regarding taxes on investment profits need another look. He suggests taxing similar investments in the same way, like treating international and Indian stocks on par or taxing different types of gold investments consistently. He also says that because taxes on stock profits have increased (from 15% to 20% for short-term and 10% to 12.5% for long-term), the tax paid when buying and selling stocks (STT) should be removed.
Higher basic exemption limit for senior citizens: Abhishek Soni recommends providing senior citizens with a more generous exemption limit to ease their financial pressures.
Increase in limit under Section 80C: Revising the Section 80C limit-- ₹1.50 lakh, which has remained unchanged since 2014, is important and much-needed to encourage and promote investments in financial instruments like Tax-Savings FDs, PPF, etc.
(By arrangement with livemint.com)
