Income Tax: Union Budget 2025 is approaching soon, and Finance Minister Nirmala Sitharaman faces a significant challenge in addressing the growing expectations of various stakeholders, particularly taxpayers. The challenge for the Finance Minister is to craft a budget that strikes a balance between fiscal discipline, offering relief to the middle class taxpayers, and fostering economic growth. Furthermore, addressing these expectations will require careful planning to ensure both short-term and long-term goals are addressed.
When FM Sitharaman introduced the new tax regime alongside the option to keep the old one in place, it added a layer of complexity. In an exclusive interview with News24, Subhash Chandra Garg, former Finance Secretary of India, said the income tax exemption limit under the old tax regime from Rs 2.5 lakh to Rs 5 lakh. He also advocated that the 30% maximum tax rate should apply to those earning Rs 25 lakh or more.
Budget 2025: Why India’s Income Tax Exemption Limit Be Rs 5 Lakh?
Garg said that it’s high time the finance minister considers raising the old tax scheme’s exemption threshold from Rs 2.5 lakh to Rs 5 lakh. He gave the reason behind his demand. He said that the inflation over the last decade has raised over 100%. Furthermore, he emphasized that with this, the current exemption limit has become outdated, leaving taxpayers with a significant burden.
“In India, approximately 10 crore people file tax returns, but around 7 crore of them don’t actually pay taxes due to the government’s rebate provision. Likewise, only about 3 crore people in India actually pay income tax, and a vast majority of them (around 95%) are salaried individuals,” said Garg.
He demanded, “The old tax scheme’s exemption threshold of Rs 2.5 lakh, unchanged for 10 years. In the meantime, there has been more than 100% inflation. Raising this exemption limit from Rs 2.5 lakhs to Rs 5 lakhs is a logical move the finance minister should make.” “Moreover, the maximum tax rate of 30% should kick in from the income of Rs 25 lakhs,” he added.
