7 Prominent Expectations of Individual Taxpayers from Union Budget 2025

India’s Finance Minister Nirmala Sitharaman plans to unveil the Union Budget on February 1, 2025. Taxpayers expect the government to raise standards in tax rules through increased exemption levels and potential rate reductions for people whose annual pay ranges from ₹10 to ₹20 lakh. Many experts predict that because this year is election time for several key states, including Delhi, the upcoming union government budget will include popular measures to raise exemptions as a strategy to win national taxpayer support.

Revision of Tax Slabs and Rates

Performing businesses nationwide await the upcoming Union Budget 2025 to discover the Finance Minister’s planned fiscal year policies. The union budget 2025 expectations are high, and many expect the following adjustments to income tax slabs:

• The Union Budget 2025 proposes a salary threshold of ₹3 lakh, which grants complete tax exemption to all taxpayers.
• The proposed tax rate of 5% for income ranging from ₹3 lakh to ₹7 lakh will support middle-income families according to the new budget plan.
• Individuals earning between ₹7 lakh and ₹10 lakh could gain from a proposed 10% tax rate according to this budget suggestion.
• Higher earners earning between ₹10 lakh and ₹12 lakh may face tax rates extending up to 15%.
• A 20% tax could apply to earnings between ₹12 lakh and ₹15 lakh under recent taxation proposals.
• Revenue from Indians who earn more than ₹15 lakh per year will continue to be taxed at 30% while remaining in the highest income tax classification.

Change in the Structure of Tax Exemptions

The upcoming may include the following changes in the structure:

• The government may raise the exemption limit under Section 80C to ₹2.5 lakhs
• Considering the rising cost of education, the Finance Minister can also consider treating these deductions as separate from 80C deductions 
• To lower OOPE (Out-of-Pocket Expenditures on Healthcare), the government may also increase the exemption limit to ₹50,000 and ₹1 lakh for senior citizens
• The new Union Budget can also bring various types of bank deposits under the exemptions available under Section 80TTA

Rise in Standard Deductions 

To restore the Old Pension Scheme (OPS), the Budget for the salaried class can include many attractive announcements, as mentioned below:

• For instance, the government may consider increasing the standard deductions available to them
• These deductions are available to salaried individuals as fixed deductions without requiring them to provide proof of expenses incurred
• Due to the increase in the cost of maintaining living standards, the government may think of raising the current threshold of standard deductions from ₹50,000 to ₹1 lakh

Easier Late Tax Filing for Taxpayers

Here are some of the current rules relating to late filing of ITR:  

• Filing an Income Tax Return (ITR) after the due date of July 31 attracts various restrictions, penalties and interest charges 
• They don’t allow you to pay taxes for two years, even if you pay additional taxes. 

However, the tax authorities can issue you notices for the previous 10 fiscal years if an income wasn’t assessed. Many experts are of the opinion that taxpayers must get an equal opportunity to file taxes for the last 10 fiscal years. 

Against this backdrop from the masses, the Union Budget 2025 expectations include much-needed tax relaxations for the middle class, and if the budget does include these tax exemptions, it can result in a significant increase in voluntary tax compliance.

Simplification of Capital Gains Tax

The current taxation structure is quite complex, which makes it challenging for investors to understand. They have to consider various factors, such as:

• Asset classes
• Holding period
• Tax rates
• Residency status

In the new Union Budget, the Finance Minister can simplify this taxation regime by taking the following measures:

• Streamline the classification of debt and equity instruments
• Merge tax treatment for unlisted and listed securities
• Simplify indexation norms  

Easing TDS Compliance for NRI Home Sellers

Currently, home buyers need to comply with the rule of deduction of 1% tax deducted at source for property purchases of over ₹50 lakhs. The government may make the following changes:

• Complying with TDS norms is quite simple in the case of resident sellers as they only have to file Form 26QB
• However, this process is comparatively complex for NRI (non-resident Indian) sellers
• In the upcoming Union Budget, the government may ease these norms to facilitate easier compliance for NRIs

Providing Tax-free Status to Annuity Income from NPS

The Union Government made an income of over ₹7.5 lakhs from the National Pension Scheme taxable since the FY 2021-22. However, to promote social welfare and financial security, the government can also consider providing a tax-free status to annuity income from the NPS. 

This is because senior citizens rely on annuity income as their primary source of income. As subscribers already have to purchase annuities from NPS, it makes little sense to put an additional burden of taxation on retired personnel. 

Some of these expectations may see the light of the day in the new Union Budget. The government may also introduce some of these measures in the Budget presented post-elections. Many experts are optimistic about changes relating to tax exemptions and deductions, which could have huge implications for the fiscal deficit.