The salaried class can expect some good news from the Union Budget 2025-26 to be presented on February 1 with the Union Finance Minister Nirmala Sitharaman expected to announce significant relief for this section.

According to sources, the government is considering hiking income tax slabs and enhancing the standard deduction to address the concerns of middle-class taxpayers amid rising inflation.

The current tax structure, with a basic exemption limit of Rs 3,00,000 under the new tax regime, has drawn criticism for being outdated in the face of escalating living costs. Experts anticipate an increase in this threshold to provide much-needed relief to small taxpayers, reducing their compliance burden and lowering mandatory tax filing obligations.

What Expert Says?

Akhil Chandna, Partner at Grant Thornton Bharat, expressed optimism about the proposed revisions, stating, “Taxpayers are hopeful for measures that address pressing financial concerns.” Chandna said,” As the 2025 Union Budget draws closer, taxpayers are hopeful for measures that address pressing financial and economic concerns. It is expected to reduce personal income tax rates, particularly for individuals earning up to Rs 15 lakh annually. This reduction is expected under both old and new tax regimes.”

“An increase in the basic exemption limit is expected by the small taxpayers to give major tax relief. It will reduce the mandatory obligation of filing tax returns and thereby reduce their compliance cost as well. Also, a reduction in the surcharge rate is needed for the high-income earners to reduce the maximum marginal rate,” Chandana added.

Chandna suggested that this deduction be linked to a percentage of salary, which would ensure a fair benefit across different income groups.

He said, “Currently the new tax regime allows a standard tax deduction of INR 75,000 which is for all income groups. To bring parity between salaries and non-salaried individuals, govt should introduce progressive standards of deductions for income from salary which shall be calculated as a percentage of salary.”

Union Budget 2025: What Else?

Additional deductions for essential expenses like health insurance, life insurance premiums, and home loan interest payments could also be incorporated to make the new tax regime more attractive.

These measures would align with the expectations of 63% of surveyed taxpayers in Grant Thornton’s Union Budget 2025 Pre-Budget Expectations Survey, who sought increased deduction limits under the old tax regime.

Under the revised new tax regime announced in the Union Budget 2024, income up to Rs3 lakh is tax-free, with progressive rates applied thereafter. For instance, income between Rs3 lakh and Rs7 lakh is taxed at 5%, while income above Rs15 lakh attracts a 30% rate.

Comparatively, the old tax regime allows several deductions, such as Rs1,50,000 under Section 80C for investments, Rs50,000 as a standard deduction, and up to Rs2,00,000 for home loan interest under Section 24(b).

In her previous budget, Sitharaman increased the standard deduction for salaried individuals from Rs50,000 to Rs75,000, resulting in annual tax savings of up to Rs17,500 for many taxpayers. The upcoming budget is expected to build on these reforms to further alleviate the financial burden on the salaried class.

With approximately 72% of taxpayers opting for the new tax regime, according to Grant Thornton’s survey, the proposed changes aim to strike a balance between simplifying tax compliance and fostering greater economic participation.

(ANI Copy)

ALSO READ: Union Budget 2025: Will Nirmala Sitharaman Slash Tariffs, End NProtectionism, Crony Capitalism To Empower MSMEs?