Will FM Nirmala Sitharaman announce tax relief for taxpayers earning up to ₹15 lakh as part of the income tax budget on ITR filing?

In the Union Budget on February 1, 2025, Finance Minister Nirmala Sitharaman might declare income tax cuts for middle-class taxpayers.

The salaried class in India looks forward to income tax relief each year. The middle class is likewise writing down all of their expectations for FM this year. On February 1, Nirmala Sitharaman gave a presentation on Budget 2025. A Reuters article claims that the government is aggressively looking into tax breaks for middle-class people, especially those making up to ₹15 lakh a year. The tax breaks may be announced in the 2025 Budget, which is scheduled to be tabled on February 1. The goal of this move is to promote the economy and increase consumer spending. Livemint was unable to confirm the information on its own.

Who will gain from the income tax budget?
Millions of taxpayers might gain a great deal from this if it is put into effect, particularly city inhabitants who are battling with high living expenses. The Reuters story states that this would be available to individuals who opt for the 2020 tax plan, which does not include exceptions such as those for home rents.

Income people have two tax options.
Indian taxpayers can now choose between the Old and New Tax Regimes. Among other expenses, rent and insurance are exempt under the Old Tax Regime. The majority of exemptions are eliminated under the New Tax Regime, which also decreases tax rates. The taxpayers are free to select the option that best suits their financial circumstances.

The new income tax system
The new tax system, which went into effect in 2020, exempts individuals making up to ₹3 lakh per year from income tax. A 5% tax will be applied to income between ₹3 and 7 lakh, a 10% tax will be applied to income between ₹7 and 10 lakh, and a 15% tax will be applied to income between ₹10 and 12 lakh. Additionally, 20% tax will be applied to income between ₹12 and ₹15 lakh, and 30% tax would be applied to income exceeding ₹15 lakh.

Nil up to ₹3 lakh

5% of ₹3–7 lakh

10% of ₹7–10 lakh

15% of ₹10–12 lakh

12–15 lakh, or 20%

30% over ₹15 lakh

previous income tax system

Income up to ₹2.5 lakh is exempt from taxes under the Old Tax Regime. A 5% tax rate is imposed to income between ₹2.5 lakh and ₹5 lakh. 20% tax is applied to personal income between ₹5 lakh and ₹10 lakh, and 30% tax is applied to income over ₹10 lakh. This system gives taxpayers more flexibility depending on their unique financial circumstances by allowing them to take advantage of a number of exemptions, such as deductions for costs like rent and insurance premiums.

Reducing the tax rate would entice more people to choose the new, simpler tax system, according to a government source quoted in the Reuters story. The survey also pointed out that people making at least ₹10 lakh account for a sizable amount of India's current income tax collection. These earners were subject to 20% tax under the previous tax system, while the new tax system levies a 10% tax rate.

Cutting personal income tax for those making up to ₹1.5 million a year, according to Siddharth Maurya, Founder & Managing Director of Vibhavangal Anukulakara Private Limited, might boost urban middle-class spending, which has been impacted by inflation and growing living expenses.

He went on to say that the government's perspective on middle-class issues, which also center on the necessity and desire to begin a consumption-based growth model, is reflected in the examination of this proposal.

2025 Budget
On February 1, 2025, Finance Minister Nirmala Sitharaman is anticipated to present the Union Budget 2025. Numerous changes to the income tax legislation were included in the July presentation of Budget 2024.