There are high expectations among taxpayers and experts about the budget for the financial year 2025. This time the government is expected to take several steps like revision of income tax slabs, increase in investment limit and incentives for startups. Amidst inflation and rising expenses, the demand for making tax rules more simple and flexible to provide relief to the middle class and senior citizens is gaining momentum.

Emphasis is being laid on making the tax system simple and progressive. Along with changes in the income tax slab, suggestions have come up to increase the investment limit under section 80C and increase in standard deduction. Apart from this, there is also talk of simplifying capital gains taxation and giving incentives to promote digital transactions. This budget will not only be important for individual taxpayers but can also give a new direction to the development of startups and MSMEs.

Changes in income tax slabs

Currently, there is no tax on annual income up to ₹2.5 lakh, while income from ₹2.5 lakh to ₹5 lakh is taxed at 5%, income from ₹5 lakh to ₹10 lakh is taxed at 20%, and income above ₹10 lakh is taxed at 30%. Experts believe that keeping in mind inflation and rising cost of living, these slabs need to be revised. For example, the limit of ₹2.5 lakh can be increased to ₹5 lakh, which will provide relief to the middle class.

Increase in investment limit under Section 80C

Currently, deduction of up to ₹1.5 lakh is allowed in various investments and savings schemes under Section 80C. Experts suggest that this limit should be increased to ₹2.5 lakh or ₹3 lakh, which will encourage people to save and invest more.

Increase in standard deduction
Currently, a standard deduction of ₹50,000 is available for salaried employees. Given inflation and rising cost of living, experts are advising to increase this deduction to ₹75,000 or ₹1 lakh, which can provide additional relief to taxpayers.

Simplification of capital gains taxation
Currently, long-term and short-term capital gains tax rates and holding periods vary on different asset classes, increasing complexity for taxpayers. Experts suggest that capital gains taxation be simplified and made uniform, making it easier for investors to understand and comply.

Incentives for startups and MSMEs
To promote the growth of startups and micro, small and medium enterprises (MSMEs), experts are advising concessions in tax rates, extension of tax holiday period, and simplification of compliance processes. This will encourage entrepreneurship and increase job creation.

Special provisions for senior citizens
Increase in tax exemption limits, tax relief on pension income, and additional deductions on medical expenses may be offered to senior citizens to ensure their financial security.

Promoting digital transactions
To discourage cash transactions and encourage digital payments, experts are advising tax incentives or duty exemptions on digital transactions, which will increase transparency and efficiency in the economy. Through these possible changes, the government aims to make the tax system more equitable, simple and incentivising, thereby boosting economic growth and increasing taxpayer confidence.

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