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  5. 5 unmissable income tax trends from FM Nirmala Sitharaman's last 4 budgets; what to expect in Budget 2025

Personal Finance News

5 unmissable income tax trends from FM Nirmala Sitharaman's last 4 budgets; what to expect in Budget 2025

rajeev kumar
By Rajeev Kumar

5 min read | Updated on January 14, 2025, 12:08 IST

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SUMMARY

Since introducing the new tax regime in Budget 2020, the finance minister has announced subsequent measures to make it more attractive. However, the FM has announced minimal changes under the old tax regime in the last four years. In the run-up to Budget 2025, experts and industry bodies are expecting the government to further revise income tax slabs and rates under the new regime to provide relief to salaried taxpayers.

budget 2025 income tax trends and expectations

The Finance Minister is expected to continue making the new tax regime sweeter for taxpayers. Representational image

Finance Minister Nirmala Sitharaman's last four budget speeches indicate the direction salaried taxpayers can expect from the government in the coming years.

As taxpayers eagerly await the next budget presentation by Sitharaman on February 1, 2025, it's important to revisit five unmissable trends from the past four budgets:

Focus on new tax regime

Since introducing the new tax regime in Budget 2020, the finance minister has announced subsequent measures to make it more attractive to taxpayers.
However, the FM has announced minimal changes under the old tax regime in the last four years.

"It has been our endeavour to simplify taxation. We have taken a number of measures in the last few years including introduction of simplified tax regimes without exemptions and deductions for corporate tax and personal income tax," the finance minister said in Budget 2024 speech.

The new regime has proved beneficial for low earners as there is no tax on income up to ₹7.75 lakh for salaried and up to ₹7 lakh for others. Further, the new regime has also benefitted high-income earners as the maximum tax rate for them has reduced from 42.74% to 39%.

Capital gains consolidated

In the last budget, the finance minister announced provisions to consolidate capital gains for tax purposes. The holding period for various assets have been rationalised.

There are now only two holding periods of 12 months and 24 months for taxation of all types of assets.

Additionally, all long-term gains from financial and non-financial assets are taxed at 12.5%, and short-term gains at 20%.

However, gains from debt investments are taxed at individual slab rates, irrespective of the holding period.

NPS made attractive

In the last four years, the finance minister has made several announcements to make the National Pension System (NPS) more attractive, specially for those in the new tax regime.

While there is no change in the taxation of NPS under the old regime, taxpayers under the new regime have got some relief.

Budget 2024 allowed private sector employees in the new regime to claim a deduction of up to 14% of the basic salary invested in NPS.

Last year, the finance minister also announced a new scheme for children. Named NPS Vatsalaya, this scheme aims to attract subscribers to the NPS fold at a very young age.

Focus on improving taxpayer's experience

The finance minister’s past budgets have highlighted the improved digital infrastructure for tax filing. The average time for processing income tax returns was reduced to 10 days for FY 2023-24 from 16 days in FY 2022-23. With increased processing time, income tax refunds are also getting credited faster.

"It has been the constant endeavour of the Income Tax Department to improve Tax Payers Services by making compliance easy and smooth...We intend to further improve this, roll out a next-generation Common IT Return Form for taxpayer convenience, and also plan to strengthen the grievance redressal mechanism," the FM said in Budget 2023.

The last four budgets have improved transparency in the availability of data to taxpayers. Now almost accurate data of taxpayers get reflected in AIS and TIS, which help at the time of income tax return filing.

In last year's budget, she also announced a comprehensive review of the Income-tax Act, 1961 to make it "concise, lucid, easy to read and understand."

Changes in TCS

FM Sitharaman's past four budgets have improved the ambit of Tax collection at source (TCS). Last year's budget even allowed adjustment of TCS against TDS on salary.

"It is proposed to allow credit of all tax deducted or collected while computing the amount of tax to be deducted on salary income under section 192," the FM said last year.

What to expect in Budget 2025?

The Finance Minister is expected to continue making the new tax regime sweeter for taxpayers. In the run-up to the budget, several experts and industry bodies are expecting that the government to revise the income tax slabs and rates to provide relief to salaried taxpayers.
EY India recently said in a note that they are expecting an increase in the basic exemption limit from ₹3 lakh to ₹5 lakh in the new tax regime and a reduction in tax rates, to provide more disposable income in the hands of taxpayers.

EY India is also hoping that the budget will remove the cap of ₹2 lakh towards the set-off of house property loss against other heads in the same year. Further, the FM may include tier 2 cities like Hyderabad, Pune, Bengaluru, Ahmedabad, Gurgaon in the list of metro cities for HRA exemption calculation purposes.

Industry bodies like FICCI, CII, and trade unions are also expecting tax relief for the salaried and the common man.
Experts at the Indian Institute of Chartered Accountants (ICAI) have suggested introducing joint taxation of married couples and the rationalisation of the standard deduction for salaried employees.

About The Author

rajeev kumar
Rajeev Kumar is a Deputy Editor at Upstox, and covers personal finance stories. In over 11 years as a journalist, he has written over 2,000 articles on topics like income tax, mutual funds, credit cards, insurance, investing, savings, and pension. He has previously worked with organisations like 1% Club, The Financial Express, Zee Business and Hindustan Times. When he's not at work, Rajeev likes to talk to people about their personal finance journeys and answer their queries.

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