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Personal Finance News

Budget 2025 income tax rate change expectation: Apply maximum 30% tax after ₹20 lakh, say experts

rajeev kumar
By Rajeev Kumar

3 min read | Updated on January 21, 2025, 09:56 IST

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SUMMARY

In Budget 2025, the Union Government is expected to tweak income tax slabs and rates under the new tax regime to put more money in the hands of taxpayers.

budget 2025 expected income tax slab change

Reducing the overall tax rate in Budget 2025 will provide immediate relief to taxpayers and stimulate broader economic growth. Representational image

Income tax slab and rate changes expected in Budget 2025: In the lead-up to the budget speech on February 1, 2025, several reports have emerged about the anticipated tax-related changes that the government may announce.
Tax professionals and industry bodies have also recommended how the budget can provide tax relief.

Experts at Taxmann have recommended that the basic exemption limit be increased to ₹5 lakh for all taxpayers. Additionally, the maximum tax rate of 30% should be applied on incomes above ₹20 lakh.

Currently, the maximum exemption limit under the new tax regime is ₹3 lakh, while it is ₹2.5 lakh under the old regime for taxpayers aged below 60 years.
"It is recommended that the maximum exemption limit be increased to ₹5,00,000 for all taxpayers, with a maximum tax rate of 30% applied after ₹20 lakh," Taxmann said in its pre-budget recommendations.
It further said that reducing the overall tax rate in Budget 2025 will "provide immediate relief to taxpayers and stimulate broader economic growth."
Taxmann’s recommendation comes on the back of media reports that say the government is planning to expand the 20% tax slab under the new tax regime.

"Allowing individuals and businesses to retain a higher portion of their income would raise disposable earnings, fueling consumer spending and demand for goods and services," Taxmann said.

Increase each slab by ₹1 lakh

The budget can provide tax relief by increasing the basic exemption limit as well as increasing each of the slab limits by at least ₹1 lakh or ₹2 lakh, according to SR Patnaik, Partner (head - taxation), Cyril Amarchand Mangaldas.

"This would reduce the tax burden for middle-income earners while maintaining higher rates for the high-income groups. Besides this, the rates of tax may also be reduced for each slab limit," he said.

Also read | Joint taxation of married couples in India: Will Budget 2025 follow the US and UK model?
While most experts are expecting that budget 2025 will revise the personal income tax provisions under the new regime, Ankit Jain, Partner, Ved Jain & Associates, a tax firm, said the old tax regime should not be sidelined. Instead, the government could maintain it as a viable alternative alongside the new regime, catering to diverse taxpayer preferences and financial situations.

"While the government appears to be favoring the new tax regime, I strongly advocate for the old tax regime, which recognizes and rewards taxpayers based on their actual expenses, such as rent, home loan repayments, school tuition fees, and other essential expenditures," Jain said.

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.

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