With the Union Budget 2025 just around the corner, much is expected to be done concerning income tax reforms and relief for the common man. There have already been recommendations that focus on key areas like personal income tax, housing benefits, savings incentives, and even electric vehicles (EVs) and cryptocurrencies. Top 10 income tax changes that the middle class awaits from Finance Minister Nirmala Sitharaman in Union Budget 2025:
1. Income Tax Slab Changes
- The government is asked to change income tax slabs in favor of middle-class taxpayers. The experts consider raising the basic exemption limit with the ever-increasing inflation.
- “A much-needed increase to ₹4 lakh, while many taxpayers hope for a ₹10 lakh limit,” said Abhishek Soni, CEO at Tax2Win.
- “The government should reduce income tax rates for individuals with an annual income of up to ₹15 lakh to increase disposable income and consumption,” said Shefali Mundra, a tax expert at ClearTax.
2. Benefits for Home Loans in the New Tax Regime
- Experts recommend that the new tax regime offer benefits for home loans, even if they are not as generous as those offered by the old regime.
3. Benefits for Homeowners
- Higher interest deduction limits on housing loans under Section 24(b) could turn out to be a real game-changer.
- “The full interest paid should at least be allowed as a deduction on one house, or the current ₹2 lakh should be increased to ₹3 lakh, said Dhruv Chopra, Managing Partner at Dewan P.N. Chopra & Co.
4. Higher NPS Deductions
- Experts suggest raising the additional National Pension System (NPS) deduction limit from ₹50,000 to ₹1,00,000. Withdrawals should also be made fully tax-free, that is, EEE treatment.
5. HRA for Tier-2 Cities
- To bring about a more balanced treatment of taxpayers in high-cost urban centers, Abhishek Soni suggests bringing the 50% HRA exemption category to cities like Hyderabad, Pune, and Bengaluru.
6. Reforms Under Section 80D
- With increasing health costs, Shefali Mundra proposes raising the tax deduction limit under Section 80D to ₹50,000 for individuals and ₹1,00,000 for senior citizens, from the current ₹25,000 and ₹50,000, respectively.
7. TDS on Provident Fund Interest
- To enhance the cash flow of the taxpayer, experts recommend deferring tax deduction on PF interest above ₹2.5 lakh until withdrawal.
8. Capital Gains Tax
- Tax experts, including Niranjan Govindekar of BDO India, suggest reviewing some of the new proposals in the 2024 budget:
- Harmonize tax rates on similar investments, like Indian and international stocks.
- Scrapping Securities Transaction Tax (STT) as the capital gains tax rates have gone up.
9. Higher Basic Exemption Limit for Senior Citizens
- A higher exemption limit for senior citizens is the need of the hour to reduce their financial burden and provide them with greater security in their old age.
10. Limit under Section 80C to be Increased
The limit under Section 80C, which is ₹1.5 lakh since 2014, should be increased. It will boost investment in financial instruments like Tax-Saving Fixed Deposits, Public Provident Fund (PPF), and others.
Conclusion
These proposed reforms reflect the aspirations of millions of middle-class taxpayers who hope for a budget that will prioritize their financial well-being. As Finance Minister Nirmala Sitharaman prepares to present the Union Budget 2025, all eyes will be on how these expectations are addressed to boost disposable income, promote investments, and drive economic growth.
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