From income tax exemption to housing loan, what are the expectations of the middle class people from the Budget?

As we get closer to the Union Budget 2025, conversations are heating up regarding potential changes to income tax policies that could benefit everyday citizens. Experts are proposing adjustments in areas such as personal income tax, housing benefits, electric vehicles, cryptocurrency, and savings incentives. These suggested reforms aim to ease the financial burden on taxpayers.

Potential Income Tax Reforms for Budget 2025:

1) Revision of income tax slabs

There may be modifications to the income tax slabs to offer relief to middle-class taxpayers.

“The income tax exemption threshold should be raised to Rs 4 lakh, considering the ongoing inflation, while many taxpayers hope for an increase to Rs 10 lakh,” stated Abhishek Soni, CEO of Tax2Win.

Tax expert Shefali Mundhra from ClearTax added, “The government ought to lower income tax rates for individuals earning Rs 15 lakh annually. This would boost disposable income and enhance consumer spending.”

2) Advantages of the new tax regime for home loans

Experts recommend that Finance Minister Sitharaman promote home ownership by offering benefits under the new tax regime, even if these benefits are less than those available under the previous regime.

3) Raising the limit for housing loan interest deductions

Dhruv Chopra, managing partner at Dewan PN Chopra & Co., mentioned, “The deduction limit for housing loan interest under section 24(b) should be increased from Rs 2 lakh to Rs 3 lakh. Deductions should apply to the full interest paid for at least one property.”

4) Raising the NPS deduction limit

Abhishek Soni proposed that the additional deduction limit for the National Pension System (NPS) be increased from Rs 50,000 to Rs 1,00,000, and that withdrawals from the NPS should be entirely tax-free.

5) HRA adjustments for tier-2 cities

To ease the burden on taxpayers in high-cost urban areas such as Hyderabad, Pune, and Bengaluru, it has been recommended to raise the HRA exemption to 50%.

6) Health care deduction under section 80D

Considering the growing health concerns, Shefali Mundhra recommended increasing the tax deduction limit under Section 80D from Rs 25,000 for individuals and Rs 50,000 for senior citizens to Rs 50,000 and Rs 1,00,000, respectively.

7) TDS adjustments on PF interest

Abhishek Soni suggested that the tax deduction at source (TDS) on PF interest exceeding Rs 2.5 lakh be postponed until withdrawal, which would enhance cash flow for taxpayers.

8) Capital Gains Tax review

Niranjan Govindkar, a tax expert at BDO India, believes that the changes made in the 2024 budget regarding taxes on investment gains should be re-evaluated. He argues that both international and Indian stocks should be taxed at the same rate, and that tax rates on various gold investments should be uniform. Additionally, he points out that with the increase in tax on stock profits (from 15% to 20% for short-term and from 10% to 12.5% for long-term), the stock transaction tax (STT) should be eliminated.