Union Budget 2025: Breaking down the expected changes to income tax slabs

As the Union Budget 2025 approaches there is growing anticipation regarding possible changes in income tax slabs The budget is an important annual event that directly impacts every taxpayer in India shaping the fiscal policy and potentially altering the amount of tax you pay Over the years the government has made numerous adjustments to tax rates and exemptions all aimed at fostering economic growth while ensuring that taxpayers are not burdened excessivelyUnderstanding the income tax slabsIncome tax slabs are thresholds set by the government that determine how much tax a person needs to pay based on their income level These slabs are usually divided into different categories including individual taxpayers senior citizens and women The governmentrsquos approach to income tax slabs has evolved over time with the main goal of easing the burden on the middle class and stimulating the economyFor the financial year 202425 the income tax slabs were as followsgt Income up to Rs 25 lakh No taxgt Income from Rs 25 lakh to Rs 5 lakh 5 percent of income exceeding Rs 25 lakhgt Income from Rs 5 lakh to Rs 10 lakh 20 percent of income exceeding Rs 5 lakh Rs 12500gt Income above Rs 10 lakh 30 percent of income exceeding Rs 10 lakh Rs 112500These rates were applicable under the new tax regime which was introduced to make the tax structure simpler by reducing exemptions and deductions The old tax regime which allowed taxpayers to avail of deductions for investments like PPF life insurance premiums and home loans was also left in place for those who wanted to claim these benefitsWhat to expect in Union Budget 2025 Income tax slabsAs the Budget 2025 approaches experts are already weighing in on the expected changes to income tax slabs Market analyst Dilip B Desai Founder and Chairman of DHC International amp Desai Haribhakti Consulting shares his insights on what the common man can expect from the upcoming budgetDilip B Desai Chairman DHC International amp Desai Haribhakti ConsultingWill the government increase the income tax exemption limitOne of the most anticipated changes is an increase in the income tax exemption limit In 2024 the government raised the basic exemption limit to Rs 25 lakh but rising inflation and increased living costs have made it necessary to reevaluate this threshold Many believe that an increase in the exemption limit would provide muchneeded relief to middleclass taxpayersWhat Desai saysThe government may increase the basic exemption limit to provide more disposable income in the hands of the middle class This will encourage people to spend more which could help boost economic growthWill there be a simplified tax structureThe current tax structure especially for those earning between Rs 5 lakh and Rs 10 lakh has been described as complex and burdensome Experts believe that introducing a new tax slab or restructuring the existing ones could make tax compliance easier while reducing financial stress for middleclass taxpayersWhat Desai saysA tax rebate of Rs 12500 is available for individuals earning up to Rs 5 lakh under the old regime and Rs 25000 for income up to Rs 7 lakh under the new regime The outer ceiling may be increased to Rs 7 lakh and Rs 10 lakh for the old and new regimes respectivelyWhat incentives can the middle class expectAs the largest taxpaying group the middle class is expected to receive some form of relief in Budget 2025 Potential measures include higher deductions for savings home loans and insurance premiums which would reduce taxable incomeWhat Desai saysUnder the new tax regime deductions under Section 80C insurance premium amp EPF and Section 80D health insurance are not allowed To boost these sectors and improve savings the government may introduce deductions in a phased manner Additionally HRA House Rent Allowance benefits may be introduced for metro cities to account for the high cost of livingWill senior citizens get tax reliefSenior citizens often struggle with rising healthcare costs and fixed or limited sources of income There has been increasing demand for higher exemptions and deductions to provide financial relief to retireesWhat Desai saysThe present basic exemption limit for senior citizens is Rs 3 lakh If the government increases the basic exemption for others a simultaneous increase for senior citizens is likely Additionally the limit for Section 80D medical insurance premium for senior citizens currently Rs 50000 could be increased to provide greater reliefWill budget 2025 introduce tax schemes for women entrepreneursAs part of the governmentrsquos focus on womenrsquos empowerment many hope that new tax incentives for women entrepreneurs will be introduced These could include tax credits subsidized loans or reducedinterest business financingWhat Desai saysTargeted incentives and schemes aimed at making credit more accessible to women entrepreneurs and selfemployed women may be introducedWill there be corporate tax reformsApart from individual tax reforms corporate tax policies may also see changes Many experts predict reductions in corporate tax rates particularly for small businesses to boost job creation and encourage investmentWhat Desai saysSmall businesses and MSMEs are among the biggest job creators To stimulate employment the government must provide incentives to MSMEs This could be achieved by reducing tax rates simplifying compliance requirements and offering targeted incentives to help small businesses growWhatrsquos the consensusDesai a keen observer of Indiarsquos economic policy emphasises that the government must strike a balance between tax relief and economic growth He believes Budget 2025 should focus on longterm sustainable measures rather than shortterm fixesKey takeaways from Dilip Desai For sustainable economic growth it is crucial to introduce measures that have a longterm impact and uplift the business community Tax is a direct cost for individuals and businesses Providing targeted relief to the business class may improve the economy and lead to overall growth This is the first fullyear budget of Modi 30 and it should help boost the economy while laying the foundation for longterm sustainable growthAs India awaits the Union Budget 2025 income tax reforms remain a highly anticipated area of focus While the government has made incremental changes over the years taxpayersmdashparticularly the middle class senior citizens and small businessesmdashare hoping for bigger bolder reforms this yearWith inflation concerns economic recovery and employment growth on the agenda all eyes are on the Finance Minister to deliver a budget that balances fiscal responsibility with muchneeded tax relief