Budget 2025 Expectations on Income Tax

As the 2025 Budget approaches, there is a widespread anticipation for positive changes and relief. This will be the second budget of Narendra Modi’s third term, and it is expected to be focused on boosting economic growth which is in line with the vision of a 'Viksit Bharat' (Developed India) by 2047. In this article, we will explore some key expectations for this budget.

Expected Date of Budget 2025 Announcement

The Union Budget for 2025 is likely to be presented by Nirmala Sitharaman on February 1, 2025, at 11:00 AM IST. 

Anticipated Changes in Income Tax from the Budget 2025 

The changes in Income tax that are being anticipated from the Budget 2025 are as follows:

Changes in Tax Slabs

• The basic exemption limit under the new regime might be increased from Rs. 3 lakhs to Rs. 5 lakhs.
• A new tax rate of 25% may be inserted.

This change aims to:

• Give relief to the individual taxpayers to boost consumption and increase disposable income, particularly for middle-income earners. 

Here's an example showing the tax calculation for an individual earning Rs.20 lakh under both the existing and proposed tax slabs:

Increase in Limit Under Section 80C

• The deduction limit under Section 80C is expected to be raised from Rs. 1.5 lakhs to Rs. 2 lakhs, as it has remained unchanged since 2014. 

This change aims to:

• Incentivize savings and investments in schemes like PPF, ELSS, and NSC, benefiting taxpayers.

Reforms Under Section 80D

• Deduction s u/s 80D is likely to be raised from current limits.(Rs.50,000, Rs.1,00,000 for senior citizens).
• It may also be extended to new tax regime. Currently, it is available only under old tax regime.

This change aims to:

• Address increasing health concerns and the rising need for comprehensive insurance coverage.

Higher Deduction Limit on Home Loan Interest

• Deduction available u/s 24(b) could be increased from Rs. 2 lakhs to Rs. 3 lakhs. 

This change aims to:

• Encourage homeownership.
• Boost the real estate sector.
• Strengthen economic growth by increasing investments in residential properties.

Simplification of Capital gains compliances and Tax Benefits to Certain assets:

• Tax concessions to green bonds, REIT and INVIT may be given.
• Capital gain provisions pertaining to above assets may be relaxed. 

This change aims to:

• To encourage sustainability practices.
• To boost real estate sector.

Compliance relaxation for TDS deduction u/s 194 IA (Purchase of immovable property):

• The buyer of the immovable property is required to deduct TDS before making payment if the consideration of the property exceeds Rs. 50 lakhs. 
• In case of a Non-Resident, the compliance becomes cumbersome as he needs to obtain a TAN for this one deduction. Also, the TAN will become inactive after this deduction.
• Simplification of compliances u/s 194IA is expected for budget 2025.

Reduced Corporate Taxes for New Domestic Manufacturing Companies

• The concessional rate of 15% is applicable to aforesaid companies which were incorporated before March 31, 2024. It may be extended to companies beginning manufacturing from April 1, 2024.
• The concessional rate may also be provided to Global Capability Centers (GCCs). 

This change aims to:

• Create new opportunities for investors setting up in India. 
• Support GCC's expansion and job creation as the growth of GCC's has increased to 1700 and projected to grow further.

Production Linked Incentives (PLI) for R&D

• A new incentive could be introduced, offering an additional deduction for specified R&D expenditures (e.g., salaries, materials) based on factors like increased turnover, additional employment, or investments in fixed assets for R&D.

This change aims to:

Related Articles:

1. Budget 2025 Expectations
2. Best Stocks to Buy Before Budget 2025
3. Budget 2025 - Date, Time, When & Where to Watch to Live?
4. Budget 2025 Highlights
5. Income Tax Slabs