Income taxpayers’ wishlist for Union Budget 2025

The first Union Budget of the Modi government 3.0, where coalition partners have a greater say than before, is to be presented by Finance Minister (FM) Nirmala Sitharam this Saturday. Her record eighth budget in a row. As always, there is a build up of expectations of tax concessions and waiver for the commoners. Only this time there are indications that the government is looking to increase disposable income in the hands of the middle class to boost consumption. The FM had also indicated a complete overhaul of the income tax laws during the interim budget presented last year. Let us look at some of the hopes being courted by the 8 crore taxpayers of the country. 

Increasing standard deduction

The standard deduction which is allowed only for salaried employees and pensioners was reintroduced in FY19 after being scrapped in FY06. With the increase in price levels and expenses, taxpayers expect that the FM will double the standard deduction from Rs 75,000 to Rs 1.50 lakh under the new regime and from Rs 50,000 to Rs 1 lakh under the old regime. 

Income Tax exemption limit 

The hike in IT exemption limit is always on the top of the wish list of all honest taxpayers every year. Of the 8 crore returns filed with the IT department 72 % were in the new regime. Last year the basic exemption limit was increased to Rs 3 lakh under the new regime while it was unchanged at Rs 2.50 lakh under the old regime. While those with the new regime expect the exemption limit to be raised  to Rs 5 lakh, those staying with the old regime also hope for parity and an exemption limit of Rs 5 lakh. 

Other big expectations are reducing the number of slabs from the existing 6 in the new regime as also raising the taxable income from Rs 7 lakh to Rs 10 lakhs. 

Deduction under Section 80C

For individuals staying in the old regime, it is wished that the exemption limit of Rs 1.50 lakhs under section 80C (which was last revised in FY 2014-15) be increased to Rs 3 lakhs. Many taxpayers expect a level playing field among tax savings products and want the tenure of tax saver deposit to be reduced to 3 years from the existing 5 years.

Deduction for NPS under Section 80CCD (1B)

Individuals can claim deductions up to Rs 50,000 on the amount contributed to the National Pension Scheme (NPS) under Section 80CCD (1B). The deduction under Section 80CCD(1B). In a country where the government does not provide any social security benefits, the current limit is found to be inadequate and the demand is that the government increase the limit to Rs 1 lakh so that individuals can save more for retirement. The hike in limit may help increase the subscriber base under NPS.

Other concerns 

Other expectations include abolition of double taxation of dividends since companies pay taxes on profits out of which dividends are paid. The shareholders pay taxes on dividends at normal rates as well. There is also a demand that HRA exemption & deduction of interest on home loans under 24B be allowed for self-occupied property in the new regime. To reduce the burden of compliance the government also needs to simplify the multiple TDS rates. Last, the government should also reduce the interest payable for delay or default in filing of return or payment of advance tax.