As Budget 2025 looms closer, anticipation is high, especially for salaried taxpayers hoping for much-needed relief amid rising living costs and an economic slowdown. While the new income tax regime boasts simplified structures and better rates, experts suggest it still lacks certain elements that could make it a game-changer for taxpayers and the economy alike.
Tax Relief: A Catalyst for Consumption and Growth
India’s GDP growth has hit a slowdown in Q2, and experts argue that putting more money in taxpayers’ hands is the fastest route to boosting consumption. This, in turn, could help rejuvenate the nation’s economic momentum.
Sandeep Agrawal, Founder and Director of Teamlease Regtech, explains:
“With India losing its growth momentum in Q2, the Budget aims to address emerging economic challenges. Revising tax slabs, particularly offering benefits for individuals earning up to ₹15 lakh annually, could provide relief to millions of middle-class taxpayers.”
Reports suggest that the upcoming Budget might introduce significant changes, including making annual income up to ₹10 lakh tax-free. Additionally, a new 25% tax slab for incomes between ₹15–20 lakh could be announced. These measures, if implemented, would enhance the appeal of the new tax regime while stimulating spending and growth.
Balancing Simplicity with Flexibility
While the new tax regime eliminates the complexity of the old system by removing most deductions and exemptions, critics believe this simplicity comes at the cost of incentives for long-term savings and retirement planning.
Swapnil Aggarwal, Director at VSRK Capital, emphasizes the need for a middle ground:
“The new regime could benefit from incorporating features of the older system, such as deductions for retirement funds and incentivizing long-term savings. This would combine simplicity with flexibility, aligning with wider goals of taxpayer relief, community security, and sustainable investments.”
Aggarwal further highlights how such changes could integrate the benefits of both systems:
“Such a makeover will raise confidence among investors, widen tax incentives, and promote a holistic development approach as reflected in the priorities of the Budget.”
What’s Missing in the Current Framework?
Although the new regime’s lower tax rates are attractive, its lack of deductions for essential expenses like housing loans, education, and medical insurance has deterred many taxpayers from switching over. Experts argue that incorporating some of these exemptions could strike the perfect balance between simplicity and inclusivity.
Additionally, incentivizing retirement savings through tax benefits could encourage more responsible financial behavior while fostering economic stability.
The Way Forward
If the proposed changes in Budget 2025—such as tax-free income up to ₹10 lakh and a 25% slab for incomes between ₹15–20 lakh—become a reality, they could mark a turning point for the new regime. Coupled with strategic incentives for savings and investments, these measures could enhance the regime’s appeal, benefiting taxpayers and driving holistic economic growth.
As the government prepares to unveil its budget, taxpayers and experts alike are watching closely, hoping for a fiscal plan that balances simplicity, relief, and long-term security.
