Budget 2025: Income-tax slab change expected for salaried employees? Here’s what experts say

Union Budget 2025 Income-tax expectations: Finance Minister Nirmala Sitharaman is expected to replace the Income-tax Act, 1961 with a new bill in the upcoming budget.

Sitharaman had proposed a comprehensive review of the Income-tax Act, 1961 in Budget 2024. She had said the review will make the tax law "concise, lucid, easy to read and understand.” It will also reduce disputes and litigation.

"As the new Direct Tax Code that will replace the existing Income-tax Act, 1961 is in the works, the upcoming budget may not contain any major structural changes on the direct tax front," Kumarmanglam Vijay, Partner, JSA Advocates & Solicitors.

"However, it is expected to provide some benefits to individual taxpayers by increasing the tax slabs to make some additional cash available to them to combat inflation," he added.

Ways to provide tax relief to salaried taxpayers

Widen income slabs: The government could revise the income tax slabs to reduce the steepness of the tax rate increases, especially in the old tax regime.

Such a move will make the old regime more competitive with the New Regime. Hence, the government may consider adjusting tax slabs or increasing the exemption limit. For instance:

Align old and new tax regimes: In Budget 2025, the government could aim to harmonise the tax slabs and rates across both regimes to create more consistency.

Provide incentives for savings and investments: Budget 2025 could include tax incentives for middle-class taxpayers who invest in retirement plans, health insurance, or home loans. Allowing a higher deduction under section 80C or introducing new exemptions for long-term investments could offer additional financial relief while promoting savings and investments.

“By incorporating these changes to personal income tax slabs and rates, Budget 2025 would be better aligned with the financial realities of salaried individuals and the middle class,” said Dr Surana.