Budget 2025 top 10 Income-tax expectations: With just a day left for the Budget 2025-26 presentation, expectations for tax relief from Finance Minister Nirmala Sitharaman have surged. In the run-up to the Budget, several tax experts, tax advisory firms, and industry bodies have recommended that the government should provide tax concessions to salaried and middle-class taxpayers.
Here's a list of 10 top expectations from the finance minister.
1. Income-tax slab and rates
It is expected that the finance minister may tweak the tax slab and rates in the new regime while the old regime may be left untouched like the previous budget. Various reports have suggested that the FM may look at providing some relief to salaried taxpayers in the ₹15-20 lakh bracket by either expanding the 20% tax slab in the
new regime or including a new 25% tax slab. However, the FM may even expand the basic exemption limit under the new tax regime to ₹5 lakh, providing immediate relief to all taxpayers.
2. Standard Deduction hike
Providing tax relief to salaried individuals and pensioners has been a longstanding demand. In the last budget, the finance minister increased the
standard deduction limit in the new regime to ₹75,000 but not in the old regime. It is expected that Budget 2025 may further hike the standard deduction limit to provide immediate relief to salaried individuals and pensioners. Some experts have even suggested linking the standard deduction to inflation.
3. Health insurance deduction in new regime and limit hike
Including health insurance premium deduction in the new regime and increasing deduction limit are two of the most genuine demands from the finance minister. She may look at these recommendations in Budget 2025. Currently, deduction against health insurance premium is allowed in the old tax regime only.
4. National Pension System deduction in new regime
In the last few years, the government has taken several decisions to make the National Pension System (NPS) attractive for individuals working in both the private and public sectors. Currently, NPS provides an additional deduction of ₹50,000 in the old regime. But there is no such facility in the new regime. It is expected that the finance minister may allow the additional NPS deduction in the new regime, and she may even consider increasing the limit to attract more investors to NPS. The FM may also look at this
proposal by ICAI.
5. Joint taxation of married couples
In the run-up to Budget 2025, several
experts and
ICAI recommended the introduction of joint taxation of married couples in the new regime. This is practised in developed countries. Joint taxation can immensely help families with a single-tax paying member. However, it seems, the government may skip this proposal in the current budget.
6. Home Loan deduction in new regime
While the government wants more taxpayers to join the simplified new tax regime, not allowing
home loan interest deduction is stopping many taxpayers from doing so. It is expected that the finance minister may either allow home loan deduction in the new regime or increase the deduction limit in the old regime.
7 House Rent Allowance in new regime
Salaried workers living on rent in cities can't claim
HRA deduction if opting for the new regime. As rents have increased across cities in the last few years, it is expected the government may consider allowing HRA exemption in the new regime. Additionally, Budget 2025 may even try to simplify the complex HRA rules.
8. Tax relief on term deposits
Amid declining household savings, Budget 2025 may look at making fixed deposit and other term deposit schemes attractive. It is expected that the finance minister may consider a
flat rate for taxation of income from term deposits, bringing them at par with other asset classes.
9. Capital Gains tax relief for long-term investments
In Budget 2024, the government increased the tax exemption limit on long-term capital gains to ₹1.25 lakh. But increased the tax rate to 12.5% and removed all indexation benefits on all assets. It is expected that Budget 2025 may relook at the capital gains provisions to encourage long-term wealth creation.
10. TDS/TCS change and relief for NRIs
It is expected that the government may simplify the TDS/TCS rules and make tax return filing easy for NRIs. Earlier, experts demanded that the government should
exempt non-residents from mandatory ITR filing if they've spent over ₹2 lakh on foreign travel but have total income in India below the basic exemption limit.
