Finance Minister Nirmala Sitharaman will present the Union Budget on February 1, 2025. Taxpayers have high expectations from this budget. According to media reports, the government is considering reducing income tax to boost consumption and accelerate economic growth. Currently, under both the old and new tax regimes, individuals earning more than ₹10-15 lakh annually have to pay a maximum tax rate of 30%. In this scenario, the government may consider making annual income up to ₹10 lakh tax-free.
Focus Likely on the New Tax Regime
In the Union Budget 2020, Finance Minister Nirmala Sitharaman introduced the new tax regime. Unlike the old system, this regime does not offer tax deductions for investments or home loans but provides lower tax rates. Initially, taxpayers showed limited interest in it, but now the number of people filing ITR under this regime is steadily increasing. This has led the government to explore ways to make it more attractive.
How Many Taxpayers Are Using the New Tax Regime?
Currently, around 72% of taxpayers are filing their income tax returns (ITR) under the new tax regime. The primary reason for this shift is its simplicity and the ease of claiming tax-free income without additional deductions. Meanwhile, those still under the old tax regime are mainly individuals who have taken home loans or invested in tax-saving schemes.
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How Many People File Zero ITR?
Data from the Income Tax Department for the assessment year 2023-24 shows that 70% of ITR filers reported zero taxable income, meaning their annual earnings were ₹5 lakh or below. Additionally, 88% of ITR filers had an income of less than ₹10 lakh, while 94% had an income of less than ₹15 lakh.
Will the Government Make Income Up to ₹10 Lakh Tax-Free?
The Income Tax Department’s data indicates that the government earns the highest revenue from individuals earning more than ₹10-15 lakh annually. Given this, there is a possibility that the government may consider making income up to ₹10 lakh tax-free, providing significant relief to the middle class. Economists have also suggested reducing tax rates for the ₹10-15 lakh income bracket. Lower tax rates would increase disposable income, leading to higher spending and economic growth.