With the escalating cost of living and inflation exerting financial pressure, taxpayers—especially salaried individuals—are looking forward to significant tax relief in the upcoming Union Budget 2025. From increased deductions to enhanced incentives for homebuyers, there are several key areas where changes could make a substantial impact.
This article explores five major tax expectations for Budget 2025 that could ease financial burdens and promote economic growth.
Expected Tax Reforms in Union Budget 2025
| Proposed Tax Reform | Expected Benefit |
|---|---|
| Higher Tax Benefits Under New Regime | Increased exemption limits and adjusted tax slabs |
| Enhanced House Rent Allowance (HRA) | Greater tax relief for salaried individuals in high-rent cities |
| Affordable Home Loan Incentives | Higher loan eligibility and reduced costs for homebuyers |
| Increased Standard Deduction | Higher deductions for salaried and pensioned individuals |
| Long-Term Capital Gains Tax Adjustments | More balanced taxation on capital gains |
1. Higher Tax Benefits Under the New Regime
One of the most anticipated changes in Budget 2025 is the enhancement of tax benefits under the new tax regime. The government is expected to revise the tax exemption limits, adjust income tax slabs, and possibly introduce additional deductions to make the new regime more attractive.
Currently, individuals earning up to ₹7 lakh per year are exempt from tax under the new tax regime. However, experts suggest that this threshold could be raised to ₹10 lakh, providing much-needed relief to middle-income earners.
Additionally, there are discussions about phasing out the old tax regime entirely in the coming years by introducing a sunset clause. If implemented, this would make the new regime more dominant while offering better incentives for savings and investments.
2. Increased House Rent Allowance (HRA) Exemption
With rising rental costs in major urban centers, taxpayers are advocating for an increase in House Rent Allowance (HRA) exemptions. Currently, only four metro cities—Delhi, Mumbai, Kolkata, and Chennai—are considered for higher HRA deductions.
Experts suggest expanding the definition of “metro cities” to include Bengaluru, Gurugram, Hyderabad, and Pune, where rental costs are considerably high. This change would provide greater tax relief for salaried individuals living in these high-rent areas.
Furthermore, tax experts argue that HRA deductions should be permitted under the new tax regime, which currently lacks this benefit. Allowing such deductions would make the new regime more appealing and taxpayer-friendly.
3. Enhanced Incentives for Affordable Housing and Home Loans
As housing prices continue to surge, there is growing demand for increased home loan tax benefits. Currently, the affordable housing loan limit stands at ₹20 lakh, which is insufficient for metropolitan areas where property prices are significantly higher.
Industry experts recommend raising this limit to ₹35-40 lakh, allowing more individuals to qualify for affordable housing schemes. Additionally, there are calls for:
- Lowering stamp duty and registration fees to reduce the overall cost of homeownership.
- Offering higher interest subsidies on home loans, especially for first-time buyers.
- Reducing home loan interest rates to stimulate the real estate sector and improve accessibility.
These measures could boost homeownership rates and provide much-needed relief to aspiring buyers amid rising property costs.
4. Increased Standard Deduction for Salaried Individuals
The standard deduction, which reduces taxable income, is another key area where taxpayers expect relief. Currently, the deduction stands at:
- ₹50,000 under the old tax regime
- ₹75,000 under the new tax regime
Financial experts advocate for raising this limit to at least ₹1 lakh, citing increased living expenses and inflation. This adjustment would provide direct tax savings for millions of salaried employees and pensioners, easing financial pressures in a high-inflation economy.
5. Reforms in Long-Term Capital Gains (LTCG) Taxation
Investors and business owners are urging the government to reconsider the taxation of long-term capital gains (LTCG). Some of the proposed refinements include:
- Reduced LTCG tax rates for long-term investors, particularly for promoters and shareholders holding stocks for extended periods.
- Incentives for longer shareholding durations to encourage sustainable investments in listed companies.
- Exemptions or deductions for capital gains reinvested into businesses or innovative projects.
These changes would promote long-term wealth creation, encourage stock market investments, and ensure a fair tax structure for capital gains.
Conclusion
As the government prepares to announce Union Budget 2025, taxpayers are hoping for much-needed reforms in tax benefits, deductions, and exemptions. By implementing these changes, the government can ease financial burdens, promote economic stability, and encourage investments in key sectors like housing and equity markets.
Whether these expectations turn into reality will depend on the final budget proposal, but one thing is certain—taxpayers are eagerly awaiting relief measures that will help them navigate the rising cost of living.
Frequently Asked Questions
1. What are the expected tax benefits under the new tax regime?
Experts anticipate an increase in tax exemption limits, adjusted tax slabs, and higher standard deductions, making the new regime more appealing.
2. Will House Rent Allowance (HRA) be increased?
There is a strong push for expanding HRA exemptions, especially for high-rent cities like Bengaluru, Gurugram, Hyderabad, and Pune.
3. How will affordable housing incentives change?
The government may increase the affordable home loan limit and reduce stamp duty and interest rates to make homeownership more accessible.
4. What changes are expected in the standard deduction?
Experts suggest increasing the standard deduction from ₹75,000 to ₹1 lakh, benefiting salaried individuals and pensioners.
5. Will long-term capital gains (LTCG) tax be revised?
Investors are seeking lower LTCG tax rates and exemptions for reinvested capital, which could encourage long-term investments.
By addressing these concerns, Budget 2025 has the potential to reshape India’s tax landscape, offering relief to millions of taxpayers while fostering economic growth.
Click here to know more.
Kishan is a knowledgeable writer specializing in agriculture and the latest government job recruitments, delivering clear and insightful content to inform and empower readers.