Major Tax Relief for Middle-Class Taxpayers in Union Budget 2025

The Indian government is preparing to announce significant tax relief for the middle class in the upcoming Union Budget. Experts predict that these tax benefits will primarily focus on the new tax regime, with income up to Rs 10 lakh per annum expected to be completely tax-free.

Key Announcements Expected in Budget 2025

Union Finance Minister Nirmala Sitharaman is set to present the budget on February 1, 2025, and sources indicate that the government is considering introducing a new 25% tax slab for individuals earning between Rs 15 lakh and Rs 20 lakh per annum. According to a report from Business Standard citing government sources, these measures aim to provide additional financial relief to taxpayers.

Income Up to Rs 10 Lakh to Be Tax-Free

In the previous Union Budget, the government had increased the standard deduction to Rs 75,000 under the new tax regime, ensuring that salaried taxpayers with an annual income of up to Rs 7.75 lakh did not have to pay taxes. However, those earning above Rs 15 lakh per annum were taxed at 30%.

A government official stated, “We are considering both options. If the budget permits, we may implement both measures.”

Revenue Loss of Rs 50,000 to 1,00,000 Crore Annually

If these proposals are implemented, the government is expected to incur an annual revenue loss of Rs 50,000 crore to Rs 1,00,000 crore. However, sources suggest that the government is prepared for this financial impact. (Moneycontrol has not independently verified this information.)

Economists Recommend Middle-Class Tax Relief

Economists have been urging the government to reduce the tax burden on the middle class to boost consumer spending. The rising cost of living and food inflation has led to reduced household expenditures, negatively impacting economic activities. The GDP growth rate fell to 5.4% in Q2 of the financial year, and experts warn that if immediate steps are not taken, the economy may face a slowdown.

Impact of Tax Reductions on Consumption

Tax experts believe that lowering tax rates for the middle class will increase disposable income, leading to higher consumption and economic growth. Currently:

• Under the old tax regime, income above Rs 10 lakh per annum is taxed at 30%.

• Under the new tax regime, income above Rs 15 lakh per annum is also taxed at 30%.

With the proposed changes, tax relief could provide a much-needed boost to household budgets, leading to increased spending and economic stability.