Budget 2025 - What Tax Reliefs Are Expected?
We're looking forward to the Union Budget 2025 this weekend, and there are a lot of important issues regarding how it will affect us all. Will there be a reduction in taxes?
How is the tax system going to be made simpler? The solutions will be revealed on Saturday, february 1, 2025.
The New Personal Tax System
With lower rates and the elimination of several exemptions and deductions, the new tax regime, which was implemented in 2020, sought to streamline the tax code. In reality, over 72% of taxpayers selected this regime when submitting their returns for the fiscal year 2023–2024, despite the government's efforts to promote it.
How is the tax system going to be made simpler? The solutions will be revealed on Saturday, february 1, 2025.
The New Personal Tax System
With lower rates and the elimination of several exemptions and deductions, the new tax regime, which was implemented in 2020, sought to streamline the tax code. In reality, over 72% of taxpayers selected this regime when submitting their returns for the fiscal year 2023–2024, despite the government's efforts to promote it.
A few ideas are being considered for the new tax structure in the next budget:
Income Tax Slab Revision: By raising the basic exemption threshold from Rs. 300,000 to Rs. 350,000, people will receive much-needed respite, particularly in light of inflationary pressures. Taxpayers' discretionary income would increase as a result.
Introducing a New Slab: To help the middle-class population, a new income tax slab may be implemented. Taxpayers earning up to Rs. 3,00,000 are anticipated to maintain their tax-free status. However, for those generating more than Rs. 3,00,000, incremental tax rates might be implemented, increasing them gradually.
Income Tax Slab Revision: By raising the basic exemption threshold from Rs. 300,000 to Rs. 350,000, people will receive much-needed respite, particularly in light of inflationary pressures. Taxpayers' discretionary income would increase as a result.
Introducing a New Slab: To help the middle-class population, a new income tax slab may be implemented. Taxpayers earning up to Rs. 3,00,000 are anticipated to maintain their tax-free status. However, for those generating more than Rs. 3,00,000, incremental tax rates might be implemented, increasing them gradually.
Anticipated Deductions: The government might increase the benefit of individual payments to the National Pension Scheme (NPS), one of the relatively few deductions permitted under the new tax regime. Only the employer's contribution is now deductible, but a plan that benefits non-salaried taxpayers in particular may include individual payments.
Rebate Under Section 87A: Residents are now entitled for a complete tax refund under Section 87A if their income is up to Rs. 7 lakh. To help the lower-income segment even more, this cap can be increased to Rs. 8 lakh.
Rebate Under Section 87A: Residents are now entitled for a complete tax refund under Section 87A if their income is up to Rs. 7 lakh. To help the lower-income segment even more, this cap can be increased to Rs. 8 lakh.
For Taxpayers Choosing the Previous Tax System
The government may make some adjustments for the 28% of taxpayers who still like the previous system, even if it is expected to keep pushing for the new tax regime:
Income Tax Slab Increase: In order to provide some assistance to taxpayers, the basic exemption level under the previous tax system may be raised by Rs. 50,000, from Rs. 250,000 to Rs. 300,000.
Salaried Individual Deductions: There may be an increase in a number of traditional deductions, like the children's education allowance and the hostel allowance. Rs. 2,500 and Rs. 5,000, respectively, might be substituted for the present deductions of Rs. 100 per month for children's education and Rs. 300 per month for dormitory allowance.
The government may make some adjustments for the 28% of taxpayers who still like the previous system, even if it is expected to keep pushing for the new tax regime:
Income Tax Slab Increase: In order to provide some assistance to taxpayers, the basic exemption level under the previous tax system may be raised by Rs. 50,000, from Rs. 250,000 to Rs. 300,000.
Salaried Individual Deductions: There may be an increase in a number of traditional deductions, like the children's education allowance and the hostel allowance. Rs. 2,500 and Rs. 5,000, respectively, might be substituted for the present deductions of Rs. 100 per month for children's education and Rs. 300 per month for dormitory allowance.
The growing expense of schooling is the reason behind this. Furthermore, as many taxpayers have been urging, the government may expand the Leave Travel Concession to cover foreign travel locations.
House Property Deduction: If the property is purchased within five years of the end of the fiscal year in which the loan was taken out, taxpayers are now eligible to deduct up to Rs. 200,000 for the interest paid on housing loans. The government may raise the deduction by Rs. 50,000 and extend the restriction to seven years in light of housing project delays and growing real estate prices. Removing the ceiling on deducting losses from home property and enabling taxpayers to do so on an actual basis, as was the situation prior to FY 2017–18, is another proposal.
House Property Deduction: If the property is purchased within five years of the end of the fiscal year in which the loan was taken out, taxpayers are now eligible to deduct up to Rs. 200,000 for the interest paid on housing loans. The government may raise the deduction by Rs. 50,000 and extend the restriction to seven years in light of housing project delays and growing real estate prices. Removing the ceiling on deducting losses from home property and enabling taxpayers to do so on an actual basis, as was the situation prior to FY 2017–18, is another proposal.