Finance Minister Nirmala Sitharaman will present the Union Budget 2025 on February 1. This budget will be the second full budget of Modi 3.0. As the Union Budget 2025 approaches, the country’s vast middle-class population eagerly awaits income tax announcements. Also, this will be Nirmala Sitharaman’s eighth budget. It includes 6 annual and two interim budgets. Finance Minister Nirmala Sitharaman will present the budget in Parliament on February 1 at 11 am as per tradition.
The stagnancy in the old tax regime has led to rising discussions about whether it’s time to scrap the old regime altogether. Yet, such a move would be risky, given the sizeable number of taxpayers who rely on benefits like home loan interest deductions. To avoid backlash, another option can be considered: merging the old and new tax regimes.
From common people to business class and youth, there are a lot of expectations from the budget. The middle-class family of India is expecting to increase the exemption limit in the income tax slab this time. Also, this time the limit of standard deduction can be increased under the Old Tax Regime. Apart from this, export duty on gold can be increased to reduce the trade deficit.
The new tax regime was introduced in the Union Budget 2020 to simplify the taxation process. By offering lower tax rates with fewer deductions, the government aimed to encourage greater participation in tax compliance while streamlining operations for the tax department.
“The government has prioritised the new tax regime to simplify the taxation process and enhance compliance. It was also aimed at letting individuals not having to make forced investments or donations for saving taxes, thereby making more cash available at their disposal,” said Kumarmanglam Vijay, Partner at JSA Advocates & Solicitors.
The preference for the new tax regime is evident, as nearly two-thirds of individual taxpayers have opted for it. According to a recent report, over 67% of taxpayers now choose the new tax regime, underscoring its growing popularity.
Major Announcements From the Last Budget
In the last budget, some big announcements were made by the central government, one of which was the increase in the standard deduction limit. Under the new tax regime, the standard deduction was increased from Rs 50,000 to Rs 75,000. This time, inflation has gone beyond the limit set by RBI. While the growth of the economy is also expected to decline. In such a situation, the central government can give tax relief to the common people in the budget.
The government may consider making further changes in the income tax slab under the new tax system so that more taxpayers can be encouraged to adopt it. In particular, there is speculation that a 30% tax rate can be applied to income levels above ₹ 20 lakh. Also, the Modi government may make the tax slab zero for an annual income of Rs 5 lakh.
Tax slabs under the new tax regime
₹0-₹3 lakh: Zero
₹3-₹7 lakh: 5%
₹7-₹10 lakh: 10%
₹10-₹12 lakh: 15%
₹12-₹15 lakh: 20%
Above ₹15 lakh: 30%
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