Union Budget 2025 Expectations: Will tax not be levied up to Rs 10 lakh instead of Rs 7.75 lakh?
Union Finance Minister Nirmala Sitharaman will present the Budget for the financial year 2025-26 on February 1, 2025. As the date of presentation of the Budget approaches, the curiosity of taxpayers is increasing. Since the number of middle-class employed people in our country is large and their number is also considerable among taxpayers, they are curious about what will be announced in the Budget regarding income tax. Sources have informed that taxpayers with income up to Rs 20 lakh can be given tax relief in this Budget. Let’s know more about this.
Currently, salaried individuals do not have to pay tax on income up to Rs 7.75 lakh with a standard deduction of Rs 75,000. Individuals with income above Rs 15 lakh fall in the 30 percent tax slab.
What are the expectations of the common people from this budget?
Two options are being considered for the upcoming budget. The first option is to make annual income up to Rs 10 lakh tax-free. The second option is to create a new tax slab of 25 percent for those with an income of Rs 15 to 20 lakh. Of course, this exemption is understood to be given only to those who adopt the new tax regime. If these options are implemented, it is estimated that the central government’s exchequer could suffer a loss of Rs 50,000 crore to Rs 1 lakh crore.
How much tax on an income of 15 lakhs?
“If the income is just a little more than Rs 15 lakh, it is not appropriate to levy 30 percent tax,” said Prof. Anil Sood of the Institute for Advanced Studies in Complex Choices. Akhilesh Ranjan, a former member of the Central Board of Direct Taxes, says that the government should introduce a new tax slab of 25 percent for those with income between Rs 15 lakh and Rs 20 lakh. This will leave more money in the hands of the citizens and thus increase demand. People in this income group buy consumer durables like fridges and TVs.
What experts say on tax slabs
Experts have expressed the opinion that there should be a 25 percent tax slab for those with income up to Rs 20 lakh. At present, when GDP growth is slow, the demand in the city will increase if there is a relief in income tax. Earlier, relief in income tax was given in the 2023 budget. At that time, the tax relief under Section 87A was increased to Rs 7 lakh for the new tax regime. Of course, even then, most of the relief is not available in the new tax regime.
Currently, there are two options available for filing income tax returns. A new option was introduced on April 1, 2020. In the new regime, the tax-free income limit was increased from Rs 2.5 lakh to Rs 3 lakh; however, tax deductions were removed. If you choose the old regime, you can get the benefit of many types of tax deductions.
Old Tax Regime
Income
up to Rs 2.5 lakh tax free 5 percent tax on income between Rs 2.5 lakh and Rs 5 lakh (Rs 12,500)
20 percent tax on income between Rs 5 and Rs 10 lakh (Rs 1,12,500)
30 percent tax on income above Rs 10 lakh (Rs 1,12,500)
In the old tax regime, income up to Rs 5 lakh was subject to tax of Rs 12,500; however, under Section 87A of the Income Tax Act, the government waives off this Rs 12,500. Therefore, income up to Rs 5 lakh was tax-free.
New Tax Regime
Income up to Rs 3 lakh tax-free
- 5 percent tax on income between Rs 3 and 7 lakh (Rs 20,000)
- 10 percent tax on income between Rs 7 and 10 lakh (Rs 50,000)
- 15 percent tax on income between Rs 10 and 12 lakh (Rs 80,000)
- 20 percent tax on income between Rs 12 and 15 lakh (Rs 1.40 lakh)
- 30 percent tax on income above Rs 15 lakh (Rs 1.40 lakh)
In the new tax regime, income up to Rs 7 lakh is subject to tax of Rs 20,000; however, the government waives off this Rs 20,000 under Section 87A of the Income Tax Act. Also, a salaried person gets the benefit of a standard deduction of Rs 75,000. Therefore, their income up to Rs 7.75 lakh becomes tax-free.