Budget 2025: Tax relief, tax exemptions, revision in tax slabs, experts share their proposals  

Budget 2025 expectations: The upcoming Union Budget for the fiscal year 2025-26, scheduled to be unveiled on February 1, is poised to introduce significant reforms in income taxation. Industry pundits are foreseeing a spectrum of proposals, from potential tax rate reductions to a complete overhaul of the taxation framework, all to stimulate consumer spending, simplify the tax structure, and foster economic development.

Various experts have put forth their respective proposals, each focusing on different tax brackets. EY India, a prominent member of the big four consulting firms, has suggested that the government should consider lowering income tax rates primarily for individuals in the lower income brackets and continue streamlining TDS procedures in the forthcoming Union Budget 2025.

EY has pitched: "The upcoming budget should focus on personal tax relief by raising the basic exemption limit in the new tax regime from Rs 3 lakhs to Rs 5 lakhs and reducing tax rates.  Clarifications on the perquisite valuation for EVs and clear guidelines for the taxation of cryptocurrency and non-fungible tokens (NFT), including the treatment of virtual digital asset (VDA) losses, are needed.”

EY has recommended eliminating the cap on offsetting house property losses against other income. To achieve tax parity, they have also suggested extending the HRA exemption at 50% to tier-2 cities such as Hyderabad, Pune, Bengaluru, and Ahmedabad. 

Additionally, EY has emphasized the need to simplify the process for employer contributions exceeding Rs 7.5 lakhs to specified funds. They have proposed deferring TDS on PF interest (above Rs 2.5 lakhs) until withdrawal to reduce compliance burdens. Lastly, EY has called for extending the ESOP tax deferment benefit to all employers, allowing for tax payment at the sale stage.

CA Ruchika Bhagat, MD, Neeraj Bhagat & Co., said FM Nirmala Sitharaman may offer some relief to taxpayers, especially the middle class, through increased tax exemptions and deductions. 

"There may be a revision of income tax slabs to provide relief to the middle-class and lower-income groups, which can help reduce the tax burden. This is often a popular move to stimulate consumption and economic growth, Bhagat said. 

Besides, she said the government might continue its trend of lowering corporate tax rates to attract more investments and boost economic growth.

"There may also be discussions about providing more tax incentives for startups, which could include exemptions on capital gains or additional deductions for R&D expenditure," she added. 

Subhash Chand Aggarwal, CMD of SMC Global Securities, said: “Continuing the trend from the 2024 Budget, we might see reduced tax rates for individuals earning up to Rs 15 lakh. This will help increase disposable income, boost demand, and support economic growth.” 

India is projected to experience a decline in GDP growth, falling below 7 percent for the first time in four years to 6.4 percent in 2024-25. Private consumption has shown improvement, driven mainly by rural demand, while urban areas are still facing challenges due to increased interest rates and a slowdown in retail loans. Given the weakening government expenditure on capital expenditure and revenue, a reduction in taxes for India’s salaried class becomes imperative.

“In the last couple of years, the finance minister has increased the basic exemption limit for individuals and tinkered with tax slabs to provide relief to the lower income bracket as well as those in the highest tax bracket in respect of surcharge levy. Hence, it would be great to provide some support for taxpayers earning between Rs 15 lakh and Rs 50 lakh or more. The government should use this lever suitably to balance between tax collections while encouraging consumer spending,” said Aarti Raote, partner, Deloitte India.