Budget 2025: Annual income up to ₹10L may become tax-free
What's the story
The new tax regime is likely to undergo major changes in the upcoming Union Budget 2025-26, a Business Standard report said. The changes could involve making an annual income of up to ₹10 lakh tax-free, and a new 25% tax slab for those earning between ₹15-20 lakh yearly. Currently, salaried taxpayers with an annual income of up to ₹7.75 lakh have no tax liability (with ₹75,000 standard deduction). Meanwhile, income above ₹15 lakh/year incurs a tax slab of 30%.
Revenue impact
Government's stance on proposed changes
A government source told Business Standard that the Centre is willing to absorb an estimated revenue loss of ₹50,000 crore to ₹1 lakh crore on account of these potential income tax reliefs.
Suggestions
GTRI's recommendations for tax reforms
Ahead of the Budget, the Global Trade Research Initiative (GTRI) has recommended major tax reforms. These include hiking the income tax exemption threshold to ₹5.7 lakh. The think tank also proposed raising the ₹1.5 lakh deduction for insurance premiums and PF contributions to ₹2.6 lakh, stressing on the need for inflation-indexed tax slabs and exemptions to maintain real value of the benefits for taxpayers.
Advocacy
Industry bodies advocate for income tax rate cuts
Industry bodies such as the Confederation of Indian Industry (CII) and the Federation of Indian Chambers of Commerce and Industry (FICCI) have pushed for income tax rate cuts. They feel the cuts could boost individuals' disposable incomes and encourage household spending, which constitutes over half of India's GDP. There are also talks to raise the standard deduction for individuals, last revised to ₹75,000 in July 2024 budget.