Budget 2025: Will you get more income tax exemption? – CNBC TV18

As the Union Budget 2025 approach, expectations for improvements in individual income tax slabs are increasing. Taxpayers and industry experts have equally urged the government to address high marginal tax rates and inflation pressure.

Currently, India provides two income tax regime: new tax regime and old tax regime, each with its separate tax slab.

Let’s take a look at the current tax slab for both governance:

New Tax Governance Slab (FY 2024-25)

Old Tax Governance Slab (FY 2024-25)

While the new tax regime provides a simple structure with low rates, it provides no space for cuts, which many individuals rely to reduce their taxable income.

Conversely, the old tax regime allows various discounts and deductions but comes with high tax rates.

Call for restructuring of tax slab

Financial experts have proposed restructuring of tax slabs to provide relief to taxpayers and simplify the system.

Former CFO TV Mohandas Pai of Infosys suggested a simplified structure to reduce the burden on medium -income taxpayers.

Their proposals include:

• Up to ₹ 5 lakh: Nil
• ₹ 5–10 Lakh: 10%
• ₹ 10–20 lakh: 20%
• Over ₹ 20 lakh: 30%

He also recommended that the overload be limited to income above ₹ 50 lakh to reduce the burden on medium and upper-medium-oriented groups.

Bombay Chartered Accountants Society (BCAS) President Anand Bathia emphasized this

Corporate taxes have been reduced, tax rates remain high for non-corporate institutions including LLP, partnership firms and individuals.

He proposed to caping individual tax rates including surcharge and cess at 30% to align with corporate tax structures.

Industry rooms such as the Indian Industry (CII) and Assocham have emphasized the need to address the increasing difference between individual and corporate tax rates.

Currently, the highest marginal rate for individuals is 42.74%, while the corporate tax rate is 25.17%, except for an inequality that something is felt.

The CII has suggested that the government considers reducing marginal tax rates for personal income, up to 20 lakhs per year, a step that they believe that consumption, development and tax revenue will help encourage revenue.

Similarly, Asocham has urged the government to reduce individual income tax rates, explaining how corporate tax rates have been reduced over the years, increasing the gap.

They argue that the highest marginal tax rate of 42.74% for individuals is highly higher than a corporate tax rate of 25.17%.

Impact of tax reforms

Sameer Kapoor, an independent advisor, emphasized the importance of modifying tax cuts under classes such as 80C and 80D to offset inflation pressure and provide meaningful relief. He also suggested that increase in exemption limit or standard deduction will have more disposable income in the hands of taxpayers, demanding demand.

Published Direct taxation at Parekh and Company LLP, published Hamirwaysia said that reducing personal income taxes will promote consumption, as taxpayers will have more disposable income.

This, in turn, will increase the demand for consumer goods and services, produce a high indirect tax collection (GST).

Hamirwaysia also said that it would be particularly effective to reduce tax rates for low -income brackets, as it will increase the purchasing power of a large part of the population.

But will the government consider changes?

According to a report by Reuters, the government may consider cutting income tax for individuals earning up to ₹ 15 lakh per year in the upcoming budget.

If the government reduces tax, the move is likely to benefit the tens of millions of taxpayers, especially the residents of the city are cumbersome with the cost of high living.

According to the report, relief will be applicable to those for 2020 (new) tax regime, under which an annual income of ₹ 3-15 lakh is taxed between 5-20%.