Most taxpayers in the country want a reduction in income tax rates in the upcoming budget. Finance Minister Nirmala Sitharaman will present the Union Budget for the financial year 2025-26 on February 1. According to a survey conducted by Grant Thornton India, around 57% of respondents believe that individual income tax rates should be lowered in the budget.
Recommendation to Reduce Income Tax Rates
Many economists argue that GDP growth has slowed in recent quarters due to a lack of disposable income in the hands of the middle class. A significant portion of their earnings is spent on taxes and managing inflation. This is why economists are also suggesting a reduction in income tax rates, which would leave more money in the hands of the middle class and boost consumption.
Will the Government Reduce Income Tax Rates?
To boost the economy, the government might consider lowering income tax rates. According to media reports, Finance Minister Nirmala Sitharaman is also focusing on simplifying income tax. Given inflation concerns, the government may provide some relief to taxpayers in the ₹10-15 lakh income tax slab.
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Relief Through Changes in Tax Slabs
Akshat Khetan, Founder of AU Corporate Advisory and Legal Services (AUCL), told news agency ANI that two major expectations from the upcoming Union Budget 2025 are the removal of the Securities Transaction Tax (STT) and the revision of the income tax exemption slab to ₹25 lakh.
Increase in NPS Tax Deduction Limit
Akhil Chandna, a partner at Grant Thornton India, suggests that the tax deduction limit for investments in the National Pension System (NPS) should be increased in the upcoming budget, and withdrawal rules should be made more flexible. This would help taxpayers enhance their retirement savings. Currently, investments of up to ₹50,000 in NPS are tax-free.
Chandna also mentioned that the government aims to promote a green environment through electric vehicles (EVs). Hence, clarity is expected on tax regulations related to EV usage. He further stated that tax benefits should be provided for purchasing EVs.