The salaried and middle class are expected to get a big relief in income tax from the budget to be presented on 1 February 2025. Will the government change the tax slab for the common man struggling with inflation? Know how the last time’s reforms increased the purchasing power of the people and will there be any more big changes in the new budget!
The Union Budget 2025 is going to be presented on February 1, and working people and the middle class across the country have high hopes of getting relief in income tax this time. Amid rising inflation and cost of living, experts believe that the government can take steps like cutting tax rates so that people can save more money in their pockets and boost economic growth.
Why are there expectations of relief in income tax?
There was no change in the old tax system in the last budget, but some reforms were made to make the new tax system more attractive. This included expanding the income tax slabs and increasing the standard deduction from ₹ 50,000 to ₹ 75,000. Experts believe that this time too, changes can be made in the tax slabs and rates can be reduced so that the middle class can be given relief.
Last major income tax reform
Expert Ajinkya Gunjan Mishra said that the new alternative tax system introduced in the 2020-21 budget was a major change. It included lower tax rates but required taxpayers to give up many common deductions and exemptions, such as benefits under sections 80C and 80D
. This change was especially beneficial for middle class taxpayers who do not avail deductions. The system was aimed at simplifying the tax system and providing relief to the middle income group.
Recent Tax Reforms
The Finance Act 2024 also provided several important reliefs for taxpayers.
- The limit of basic tax-free income was expanded.
- Tax rates were reduced at certain income levels.
- Standard deduction increased from ₹50,000 to ₹75,000.
- Long-term capital gains tax reduced from 20% to 12.5%. However, the removal of the
- indexation clause may increase the tax burden in some cases.
Impact on the common man
For middle class taxpayers, these reforms meant more money in their hands, allowing them to spend more on their needs and desires. This not only increased their purchasing power but also boosted consumer spending and economic growth.
Comparison with global tax rates
The maximum tax rate under the new tax system in India currently is 39%, which is close to the global average.
- The maximum tax rate in the UK is 45%.
- 37% in the US , while
- In countries like Australia and Japan this rate is around 45%.
What will be in the budget of 2025?
Economic experts suggest that the government can provide relief to the middle class by further rationalizing income tax rates. This will not only increase their purchasing power but will also boost economic activities. In the pre-budget meeting with Prime Minister Narendra Modi, experts discussed these issues and said that tax cuts can increase both people’s savings and spending.
What are the expectations of the public?
This time in the budget, there are chances of increase in income tax exemption limit, change in tax slabs, and implementation of lower tax rates. Will this budget prove to be a relief for the common man? The answer to this question will be found in February 2025. Till then, everyone is eagerly waiting for this announcement.