Budget 2025 and Its Expectations: What India Awaits?

As India prepares for the Union Budget 2025-26, expectations are soaring, especially among the salaried and middle-class taxpayers. Finance Minister Nirmala Sitharaman is set to present the budget on February 1, 2025, at 11 am in Parliament. With the Economic Survey scheduled for January 31, 2025, the stage is set for a budget that could bring significant changes to the income tax structure, exemptions, and deductions. Here’s a closer look at what taxpayers are hoping for and what the budget might deliver.??

Key Expectations for Income Tax Reforms??

1. Changes in Income Tax Slabs

One of the most anticipated changes is the revision of income tax slabs under the new tax regime. Taxpayers are hoping for a more lenient structure, with proposals to make annual income up to Rs 10 lakh tax-free. This move could provide substantial relief to the middle class, boosting disposable income and stimulating urban consumption.??

2. Enhanced Exemptions and Deductions??

The middle class is also looking for increased limits on exemptions and deductions in both the old and new tax regimes. Key areas of focus include:??

- Home loan interest deductions: A hike in the limit for interest paid on home loans could encourage housing investments.??

- Health and life insurance premiums: Higher deductions for insurance premiums would provide financial security and incentivize insurance uptake.??

- Voluntary NPS contributions: Introducing deductions for voluntary contributions to the National Pension System (NPS) under the new regime could promote long-term savings.??

- Child education expenses: Raising the limit for tuition fee deductions would ease the burden on parents.??

3. Standard Deduction Hike

The standard deduction is another area where taxpayers expect relief. While the old regime offered a flat deduction of Rs 50,000, the new regime increased it to Rs 75,000 in Budget 2024. Taxpayers are hopeful for a further hike, which would directly increase their in-hand income.??

4. Simplification of Capital Gains Tax??

Taxpayers and experts are also advocating for simplifying long-term capital gains (LTCG) and short-term capital gains (STCG) taxes. There is a strong demand for reintroducing indexation benefits on LTCG for debt mutual funds and real estate. However, recent reports suggest that major changes in this area are unlikely, as significant provisions were introduced in the interim budget of 2024.??

5. Direct Tax Code (DTC) Introduction??

One of the most significant expectations from Budget 2025 is the introduction of the Direct Tax Code (DTC). Last year, the government announced a comprehensive overhaul of the 63-year-old Income Tax Act, aiming to simplify tax laws and reduce litigation. The DTC could be a game-changer, making tax compliance easier and more transparent for taxpayers.?

Conclusion??

Union Budget 2025-26 holds immense significance for India’s taxpayers, especially the salaried and middle-class segments. With expectations ranging from revised tax slabs to enhanced deductions and the introduction of the Direct Tax Code, the budget could bring much-needed relief and simplification. As Finance Minister Nirmala Sitharaman prepares to present the budget, all eyes are on the government to deliver a budget that balances fiscal prudence with taxpayer-friendly measures.??