Key Points
- Budget Announcement Date: Finance Minister Nirmala Sitharaman is expected to present the Union Budget 2025 on February 1.
- Tax Relief for Salaried Class: Income tax exemption may be extended to individuals earning up to ₹15 lakh annually, offering significant savings to taxpayers.
- Revised Tax Slabs: Proposed changes include increasing the basic exemption limit to ₹4 lakh and revising slabs to reduce the tax burden for middle-income earners.
- Focus on Urban Middle-Class: The government aims to provide relief to urban taxpayers, especially those earning ₹13-14 lakh annually, to combat inflation and encourage consumption.
- Rise in Tax Revenue: With personal tax collection surging 25% during April-November FY 2025, the government is well-positioned to introduce these reforms.
New Delhi: As the countdown to Union Budget 2025 begins, expectations are mounting for a significant income tax relief for middle-class taxpayers. Reports suggest that Finance Minister Nirmala Sitharaman is likely to announce changes in the income tax slabs to ease the financial burden on salaried individuals, particularly those in urban areas.
Proposed Changes in the New Tax Regime
According to media reports, the government is considering increasing the basic exemption limit under the new tax system from ₹3 lakh to ₹4 lakh. Alongside, adjustments in other slabs are expected to make the tax regime more attractive.
- Revised Slabs (Proposed):
- Income up to ₹4 lakh: No Tax
- Income from ₹4 lakh to ₹7 lakh: 5% Tax
- Income from ₹7 lakh to ₹10 lakh: 10% Tax
- Income from ₹10 lakh to ₹14 lakh: 15% Tax
- Income above ₹14 lakh: 20%-30% Tax
These changes are aimed at benefitting taxpayers earning up to ₹15 lakh annually, significantly increasing their disposable income.
Current Tax Structure
Under the existing system:
- Income up to ₹3 lakh is exempt.
- ₹3-6 lakh is taxed at 5%, ₹6-9 lakh at 10%, ₹9-12 lakh at 15%, ₹12-15 lakh at 20%, and over ₹15 lakh at 30%.
- A standard deduction of ₹75,000 ensures that income up to ₹7.75 lakh is effectively tax-free.
The upcoming revisions are expected to expand these limits, aligning tax liabilities more closely with rising inflation and cost-of-living expenses.
Government’s Intent Behind Tax Exemptions
Experts believe the tax reforms aim to provide relief to urban middle-class taxpayers, particularly those earning ₹13-14 lakh annually, who are most affected by rising inflation. The government intends to stimulate consumption by increasing disposable income, which could, in turn, drive economic growth.
“The changes are likely to ease financial pressure on urban taxpayers while promoting spending and boosting overall demand,” said an expert quoted in media reports.
A Strong Fiscal Backdrop
The surge in personal tax collection by 25%, amounting to ₹7.41 lakh crore during April-November FY 2025, places the government in a strong fiscal position to implement these reforms. This growth, consistently outpacing corporate tax collection, has bolstered the government’s ability to offer relief while maintaining fiscal stability.
A Win-Win for Taxpayers and the Economy
If implemented, the proposed tax exemptions and slab adjustments could bring much-needed relief to millions of taxpayers while boosting economic activity through increased consumer spending. All eyes are now on February 1, as Finance Minister Nirmala Sitharaman unveils the details of Union Budget 2025.
