Budget 2025: Big Tax Relief for Taxpayers, Income up to ₹10 Lakh May Be Tax-Free

In a move aimed at providing significant relief to taxpayers, the Budget 2025 is expected to introduce major changes in income tax slabs, benefiting the middle class and salaried taxpayers. Here’s what you need to know about the possible tax changes:

What’s in Store for Taxpayers?

• Tax-Free Income Up to ₹10 Lakh
  The government is considering making annual income up to ₹10 lakh completely tax-free. This could bring substantial relief to many middle-class individuals who have not seen significant tax reductions in recent budgets.

• New Tax Slab for Higher Incomes
  A new tax slab of 25% may be introduced for individuals earning between ₹15 lakh and ₹20 lakh annually. Currently, income above ₹15 lakh is taxed at 30%. This move is expected to reduce the burden on middle to upper-middle-income taxpayers.

Revenue Impact and Potential Loss

To implement these changes, the government is willing to bear a revenue loss of ₹50,000 crore to ₹1 lakh crore, which reflects a strategic decision to boost economic growth and consumer spending.

What Did Previous Budgets Do?

In 2023, the government had increased the rebate under Section 87A, allowing income up to ₹7 lakh to be tax-free, but only if most deductions were waived. The new proposal seeks to increase this exemption limit further, making income up to ₹10 lakh tax-free without the need to forgo many deductions.

Economic Boost

The proposed tax changes are expected to stimulate urban consumption, especially amidst a slowing economy. With GDP growth slowing to 5.4% in the second quarter of FY 2025, these tax reliefs could enhance consumer purchasing power, boosting demand and helping revive economic growth.

Expert Opinions

• Akhilesh Ranjan, PwC consultant and former CBDT member, supports the introduction of a 25% tax slab for those earning between ₹15 lakh to ₹20 lakh, suggesting that it will leave more money with the middle class to spend on consumer goods like TVs, fridges, etc.

• Professor Anil K Sood of IASCC points out the unfairness of taxing income slightly above ₹15 lakh at 30% and calls for relief for salaried individuals while maintaining existing incentives.

Focus on Fiscal Deficit

Experts like Professor Sood also emphasized the need to address the fiscal deficit. Although the government plans capital expenditure, there is concern over the underutilization of funds, such as those held by the National Highway Authority of India (NHAI).

Conclusion:
The changes in the tax slabs, if implemented, would provide significant relief to middle-class taxpayers and could be a crucial step toward boosting economic growth through increased consumer spending.