Budget 2025: Top 10 expected income tax changes for salaried taxpayers

What will be income tax slabs and income tax rates after Union Budget 2025? Will FM Nirmala Sitharaman increase standard deduction under new tax regime and include popular exemptions like 80C, HRA, 80D? Since new tax regime is going to be the default tax regime, experts expect no major changes in old tax regime. Any rationalisation in income tax slabs, rates and basic exemption limit, rebate etc can only be expected in new tax regime. 

So we take a look at top 10 income tax expectations of salaried and common man from Budget 2025:

Income Tax Slabs

Budget 2025 Income Tax Rates & Slabs: The new income tax slabs for FY 2024-25 announced by FM Sitharaman in Budget 2024 were aimed to reduce tax burden of common man. So experts expect further rationalisation of income tax slabs and rates and shifting 30% tax slab to income above Rs 20 lakh instead of Rs 15 lakh now.

Budget 2025 Standard Deduction

Budget 2025 income tax expectations: Standard deduction under new tax regime was raised to Rs 75,000 from Rs 50,000 last year. Experts feel that since there are no major tax exemptions and deductions in new tax regime, FM Sitharaman should increase standard deduction to at least Rs 1 lakh to encourage switch to new regime.

Higher Basic Exemption Limit

Budget 2025 income tax expectations: Since government is promoting new tax regime, old tax regime might remain unchanged. Currently new tax regime has a basic exemption limit of Rs 3 lakh. 

Expectations are that this limit could be raised to Rs 5 lakh, so individuals have more disposable income for consumption or savings and hence economic growth.

Rebate Increase

Budget 2025 income tax expectations: Currently individuals with income up to Rs 7 lakh are eligible for full tax rebate. This year expectations are that rebate limit could be raised to Rs 10 lakh. Such a move in new tax regime would be a big relief for middle income taxpayers, feel experts.

Budget 2025 Section 80C

Budget 2025 income tax expectations: Experts want Section 80C to be included in the new tax regime to encourage savings. Currently Section 80C limit of up to 1.5 lakh is available in old tax regime.

NPS Benefits

Budget 2025 income tax expectations: Make NPS an EEE product (Exempt-Exempt-Exempt) to encourage NPS adoption. Also include additional tax benefit of 50,000 for NPS in old tax regime in new tax regime as well.

Budget 2025 HRA

Budget 2025 income tax expectations: HRA exemption should include tier 2 cities along with existing metropolitan cities. Hyderabad, Pune, Bengaluru, Ahmedabad and Gurgaon should have HRA exemption of 50% of basic salary, say experts.

Budget 2025 Section 80G/Section 80TTA

Budget 2025 income tax expectations: As charitable contribution and saving with banks would be encouraged, say experts of tax, the government should consider allowing Section 80G and Section 80TTA benefits under the new income tax regime.

Budget 2025 Section 80D

Budget 2025 income tax expectations: With health costs rising, experts say FM should allow Section 80D exemption on health insurance premium in new tax regime.

Housing Tax Benefits

Budget 2025 Housing Tax Benefits: Experts say government may increase tax benefits for home buyers. This could include higher deductions on housing loan interest or principal payments. Currently individuals can claim losses under income from house property up to Rs 2 lakhs per year. This limit needs to be revised and can be increased to Rs 3 lakhs per year which will strengthen the ‘housing for all’ programme.