The big announcement is coming soon! Will these expectations be met
As the Union Budget 2025 approaches, taxpayers across India are keenly anticipating measures that will provide relief and foster economic growth. Finance Minister Nirmala Sitharaman is expected to address various concerns, especially in the world of personal income tax, to bolster disposable incomes and stimulate consumption.
Revisions in Income Tax Slabs
A significant expectation among taxpayers is the restructuring of income tax slabs. Currently, individuals earning between ₹12,00,000 and ₹15,00,000 are taxed at 20%, while those with incomes above ₹15,00,000 face a 30% tax rate. There is a growing demand to reduce these rates to 15% and 20%, respectively, to increase disposable income and encourage spending. Such adjustments could provide substantial relief to the middle class and stimulate economic activity.
Enhancement of Standard Deduction
The standard deduction, which allows salaried individuals to reduce their taxable income, currently stands at ₹75,000 under the new tax regime. Given rising living costs, experts advocate for an increase in this deduction to ₹1,00,000. This move would make the new tax regime more attractive, especially since it offers limited exemptions and deductions compared to the old regime. An enhanced standard deduction would alleviate the tax burden on salaried employees and potentially boost consumption.
Rationalization of Capital Gains Tax
Investors are hopeful for a more streamlined capital gains tax structure. The current system is complex, with varying tax rates and holding periods for different asset classes. Simplifying these rules could encourage investment in capital markets and other assets. A uniform tax rate and holding period across asset classes would reduce confusion and promote a more investment-friendly environment.
Incentives for Housing and Real Estate
The real estate sector, a significant contributor to the economy, anticipates incentives that could rejuvenate demand. Taxpayers are looking forward to increased deductions on home loan interest and principal repayments. Enhancing these deductions would make housing more affordable and could lead to a surge in property purchases, providing a much-needed boost to the sector.
Support for Digital and Green Initiatives
With a global emphasis on sustainability and digitalization, taxpayers expect the budget to introduce incentives for adopting green technologies and digital infrastructure. Tax benefits for investments in electric vehicles, renewable energy solutions, and digital tools could encourage individuals and businesses to transition towards more sustainable and efficient practices.
Relief for Senior Citizens
Senior citizens anticipate higher exemption limits and additional deductions in the upcoming budget. Given the rising healthcare costs and the need for financial security in retirement, increasing the exemption limit and providing higher deductions for medical expenses would offer significant relief to this demographic.
Boosting Savings through Enhanced Section 80C Limits
Section 80C of the Income Tax Act allows deductions up to ₹1,50,000 for investments in specified instruments like Public Provident Fund (PPF), National Savings Certificate (NSC), and Equity-Linked Savings Schemes (ELSS). Taxpayers are hopeful for an increase in this limit to encourage savings and investment among individuals. Enhancing the 80C limit would not only provide tax relief but also promote financial discipline and long-term wealth accumulation.
Expectations for the Agricultural Sector
The agricultural sector, employing nearly 45% of India’s workforce, is poised for a significant budgetary boost. Reports suggest that the government plans to increase its agriculture budget by over 15%, marking the most substantial rise in six years. This increase aims to support rural incomes and control inflation, focusing on high-yield seed varieties, improved storage, and supply infrastructure. Such measures are expected to enhance productivity and stabilize farmer incomes.
Anticipated Changes in Subsidy Allocations
The government is likely to raise spending on major subsidies, including food, fertilizer, and cooking gas, by 8% to $47.41 billion in the next fiscal year. This move aims to address higher food and energy costs, providing relief to consumers. The food subsidy is expected to grow by about 5% due to increased rice purchases and storage costs, while allocations for cooking gas subsidies may more than double.
Corporate Tax Reforms
The corporate sector is looking forward to reforms that simplify the tax process and offer enhanced incentives for businesses. Streamlining tax compliance procedures and providing incentives for research and development could foster innovation and economic growth. Such measures would enhance the ease of doing business and attract foreign investment.
As the budget announcement approaches, taxpayers remain hopeful that their expectations will be addressed, leading to a more prosperous and financially inclusive future.
