Top 8 income-tax benefits expected from Nirmala Sitharaman's record 8th Budget Speech

Finally, the Union Budget Day is here. All the answers to taxpayers' queries in the run-up to this day will be answered shortly in Finance Minister Nirmala Sitharaman's record 8th Budget speech, starting at 11 am.

Meanwhile, as we all eagerly await the budget speech, this article looks back at the top eight income-tax benefits expected from the Finance Minister.

Benefit for the lower middle class

It is widely expected that the finance minister will announce tax cuts or tweaks in income tax rates and slabs to ease the burden of the middle class struggling with high prices and stagnant wage growth.

Expectations of income tax cuts, especially for the lower middle class, have soared since Prime Minister Narendra Modi invoked the goddess of wealth to uplift the poor and middle class. In his address to media before the start of the Budget Session on Friday (January 31, 2025), PM Modi said, "I pray to Goddess Lakshmi that the poor and the middle-class sections in the country are blessed by her."

"Middle-class taxpayers are experiencing reduced disposable income due to high taxes, inflation, and rising living expenses. Revisions to tax slabs and deductions under Section 80C have not been updated for many years and are due for revision in line with inflation rates. The tax-free income threshold should be increased to ₹10 lakh, with a 10% rate for income up to ₹20 lakh, a 20% rate for income up to ₹30 lakh, and a 30% rate for incomes above ₹30 lakh," says Ashish Agrawal, Partner, Dhruva Advisors.

Benefit for salaried taxpayers

As this is the first full budget in the third term of PM Modi-led NDA government, experts believe that the finance minister will provide some tax relief to salaried employees, especially those who have opted for the new tax regime. It is anticipated that the FM may do either of the following:

• Expand the current 20% tax slab in the new regime to include employees earning up to ₹20 lakh
• Introduce a new tax slab of 25% to benefit those earning above ₹15 lakh.
• Make income up to ₹10 lakh tax-free by extending tax rebate under section 87A
• May increase the basic exemption limit from ₹3 lakh in new regime to ₹5 lakh.

Benefit for non-residents

"For foreign taxpayers, certain simplifications are needed, such as allowing tax payments directly from overseas bank accounts without the necessity of opening an Indian bank account and easing the filing of Form 10F, which will go a long way in restoring their trust," says Agrawal.

Benefit for Income tax return filers

Income-tax Return (ITR) filers may get some relief by way of further simplified ITR filing and refund processes expected to be announced by the finance minister. Further, it is anticipated that changes to new tax regime in Budget 2025 would attract more taxpayers to opt for it. ITR filing in the new regime is easy as taxpayers don't have to worry about too many deductions and exemptions.

Benefit for home loan borrowers

Benefit for senior citizens

Senior citizens may expect rationlised tax slabs and pension rules for them. Further, the government may think of exempting more senior citizens from ITR filing obligation. Currently, senior citizens aged above 75 years don't have to file ITR if their source of income is only from bank deposits and pension.

Benefit for investors and depositors

The capital gains changes annoucned in the last budget have not gone down well with many investors and experts. They now hope that the FM may reconsider her proposal and cut long-term capital gains taxes for different assets. However, this is unlikley. It is also expected the budget may make term deposits attractive by announcing a flat tax rate on FDs and RDs.