Mumbai, December 30: As the Union Budget 2025 approaches on February 1, 2025, all eyes are on Finance Minister Nirmala Sitharaman to announce potential income tax relief for salaried employees. There is growing speculation that the government may cut tax rates for individuals earning up to INR 15 lakh annually, offering much-needed relief to the middle class. With the economy facing challenges, such a move would ease the financial burden on millions of taxpayers, particularly those grappling with high living costs.

By cutting down on income tax, the government aims to boost consumption and support economic recovery amid slowing growth. According to a Reuters report, the proposed tax relief for individuals earning up to INR 15 lakh could make a significant difference, especially for salaried employees in urban areas facing rising costs. With disposable income under pressure, such tax cuts could encourage greater consumer spending, which is crucial for reviving demand in key sectors hit by inflation and economic stagnation. Income Tax Cut for Middle Class in Union Budget 2025-26? Report Says Government May Slash Tax Rates for Those Earning up to INR 15 Lakh.

India’s tax system offers two regimes: the Old Tax Regime (OTR) and the New Tax Regime (NTR). Under the OTR, taxpayers can claim exemptions like housing rental and insurance, with tax rates of 5 per cent for incomes between INR 2.5 lakh and INR 5 lakh, 20 per cent for INR 5 lakh to INR 10 lakh, and 30 per cent for incomes above INR 10 lakh. On the other hand, the NTR, which was introduced in 2020, offers lower tax rates but eliminates exemptions, with tax rates ranging from 5 per cent for incomes between INR 3 lakh to INR 7 lakh, 10 per cent for INR 7 lakh to INR 10 lakh, and 20 per cent for INR 12 lakh to INR 15 lakh. Union Budget 2025–26: Assocham Seeks Further Ease of Doing Business, Credit Flow for MSMEs.

The proposed tax cuts could encourage more taxpayers to opt for the NTR, which is simpler and offers lower rates despite its lack of exemptions. This shift could lead to increased tax compliance and reduce the complexity of filing returns. The government is likely to announce details closer to the February 1 budget, with many hoping that these changes will help revive economic activity by putting more money in the hands of consumers.

(The above story first appeared on LatestLY on Dec 30, 2024 06:03 PM IST. For more news and updates on politics, world, sports, entertainment and lifestyle, log on to our website latestly.com).