With the presentation of Union Budget 2025 by Finance Minister Nirmala Sitaraman on February 1 according to Livemint.com, taxpayers are eagerly anticipating income tax relief. Individuals and corporate entities alike are hoping for revised income tax slabs and potential deductions to provide relief, increase disposable income, and boost consumer spending.
There is widespread expectation that the government will rationalize Goods and Services Tax (GST) according to the Thelivemint.com Budget live blog). Lowering GST on essential goods and services could alleviate inflationary pressures and enhance affordability, especially in sectors like healthcare, education, and daily consumables.
Especially the salaried class are looking forward to significant tax reforms that could ease their financial burden amid rising inflation and living costs. Here are five key expectations from the upcoming budget.
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Increased tax benefits under the new regime
Experts anticipate that the government may enhance tax benefits under the new income tax regime to encourage savings and make it more appealing to taxpayers.
Aakash Uppal, Partner & Leader (North & East), Corporate Tax, Tax and Regulatory Services, BDO India, noted that individuals earning up to Rs 7 lakh annually are currently exempt from taxes under the new regime. He suggested that the government might raise the basic exemption limit, adjust tax slabs, and increase the standard deduction to further ease the tax burden. Some reports indicate that the tax-free income limit could be raised to Rs 10 lakh, providing significant relief to the salaried class and boosting economic growth.
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Higher house rent allowance (HRA) exemptions
With the rising cost of living, particularly in high-rent cities, there is growing demand for an increase in HRA exemptions.
Deepashree Shetty, Partner, Global Employer Services, Tax & Regulatory Services, BDO India, emphasized the need to extend HRA benefits to high-rental cities like Bengaluru, Gurugram, Hyderabad, and Pune by classifying them as ‘metro cities.’ She also recommended allowing salaried taxpayers to claim HRA deductions under the new tax regime to ease rental expenses.
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Affordable home loans and housing benefits
Housing affordability remains a major concern, and industry experts are calling for increased tax exemptions on home loans and incentives for affordable housing.
Deepak Patkar, CEO & MD, SMFG India Home Finance Co. Ltd, suggested increasing the affordable housing loan amount limit from Rs 20 lakh to better reflect rising property costs, especially in metro cities. Amit Chopra, President of NAR India, added that reducing stamp duty and registration fees, along with lowering home loan interest rates, particularly for first-time buyers, would significantly boost homeownership and drive sectoral growth.
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Increased standard deduction
Currently, the standard deduction is Rs 50,000 under the old tax regime and Rs 75,000 under the new tax regime.
Akash Uppal has called for a further increase in the standard deduction limit to help the middle class manage rising expenses. He reiterated that enhancing the new tax regime with higher deductions would make it more taxpayer-friendly, encourage savings, and support economic growth.
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Long-term capital gains (LTCG) tax reform
Investors and financial experts are advocating for refinements in long-term capital gains tax to make it more equitable.
Krishna Patwari, founder and Managing Director of WWIPL.com proposed reducing LTCG tax rates for long-term investors and offering incentives for extended share holdings. He also suggested tax exceptions or deductions for capital reinvested, which could foster innovation and business expansion while ensuring a fair taxation policy.
As budget 2025 approaches, all eyes will be on Sitharaman’s speech to see how these expectations are addressed and how they shape the financial landscape for taxpayers across the country.