Will Taxpayers Get Relief in Union Budget 2025?

With the Union Budget 2025 on the horizon, anticipation is high among taxpayers who are hoping for some form of income tax relief. Given the current economic climate and the government's focus on boosting consumption, many believe that incremental tax changes could play a crucial role in enhancing disposable income.

While financial analysts had earlier informed IndiaToday.in that substantial tax relief is unlikely, taxpayers continue to hope for minor adjustments that could ease financial burdens. In particular, salaried individuals and middle-class taxpayers are looking forward to possible changes that would allow them to save more while keeping spending levels stable.

Boosting Homebuyers and the Real Estate Sector

Akhil Chandna, Partner at Grant Thornton Bharat, emphasized that "introducing new tax incentives for affordable housing could offer relief to first-time homebuyers and provide a much-needed boost to the real estate sector." Given the rising cost of homeownership, additional deductions or tax breaks could make housing more accessible, encouraging more people to invest in property.

India’s vast middle class is also pushing for more tax-saving provisions under the new tax regime. At present, this framework offers lower tax rates and a standard deduction of ₹75,000, which is ₹25,000 higher than the ₹50,000 deduction available under the older regime. However, the new system does not yet include several key deductions that have made the older regime particularly appealing to salaried professionals, especially those with home loans.

Capital Gains Tax Rationalization: A Distant Possibility?

Many investors have been calling for reforms in capital gains taxation, arguing that simplification would not only boost investor confidence but also contribute to overall economic growth. However, given that capital gains tax adjustments were already addressed in the previous budget, further changes in this area seem unlikely.

Pranav Haridasan, MD and CEO of Axis Securities, commented, "Expectations around taxation primarily focus on rationalizing capital gains tax to simplify compliance and encourage broader market participation."

There has also been some speculation about a potential reduction in the Securities Transaction Tax (STT), but according to Haridasan, such a move is improbable. The government remains focused on maintaining revenue levels, which makes an STT cut unlikely.

Potential Adjustments in Deductions

Instead of broad tax cuts, experts believe the government could introduce targeted relief measures for individual taxpayers. One such possibility is an increase in deductions under Section 80C, which currently allows individuals to claim up to ₹1.5 lakh in tax savings through investments in instruments like Public Provident Fund (PPF), Employee Provident Fund (EPF), and National Savings Certificates (NSC).

Expanding deductions under 80C or introducing additional tax-saving options could help taxpayers reduce their overall tax liability while also encouraging long-term savings. Furthermore, there may be scope for refining the new tax regime to make it more attractive to a larger section of the population.

Balancing Fiscal Priorities with Taxpayer Expectations

While taxpayers remain hopeful for relief measures, the government must also balance fiscal priorities, especially considering its expenditure on infrastructure, social welfare programs, and economic development initiatives. Any tax changes introduced in the Union Budget 2025 will need to align with these broader financial objectives.

Ultimately, while major overhauls in the tax structure are not expected, taxpayers can still look forward to minor tweaks that may ease financial pressures. Whether through increased deductions, housing-related tax incentives, or targeted tax relief, the government will likely aim to strike a balance between revenue generation and boosting economic participation.