As the Union Budget for 2025 approaches, taxpayers and investors are anticipating measures that will ease financial burdens and encourage savings.

Here’s a breakdown of the key expectations for the upcoming Budget:

Rationalising personal income tax slabs

Taxpayers expect the government to adjust income tax slabs, reducing the tax burden, especially at both the lower and upper ends of the income spectrum.

“We expect the 2025 Budget to rationalise personal income tax slabs, both at the bottom end and at the top end, to reduce tax burden and improve disposable income in the hands of individuals,” says Krishna Killa, Founder of Ironclad Asset Management.

Such changes would help increase the disposable income of individuals, providing a boost to the economy.

Enhancing tax exemptions and deductions

The demand for higher exemptions and deductions continues to be a key focus. Here are the key proposals (as compiled by Sujit Bangar, Founder, Taxbuddy):

Basic exemption limit

One of the major proposals is to increase the basic exemption limit from ₹3 lakh to ₹5 lakh under the new tax regime.

This change would provide relief to the middle class and lower their taxable income.

Section 80C deduction

The ₹1.5 lakh limit for Section 80C has remained unchanged for several years. Taxpayers had hoped for an increase in the last Budget, and this expectation persists for Budget 2025.

A rise in this limit could encourage more savings and financial planning.

Health insurance deductions

With the rising costs of healthcare, there are calls for an increase in the tax deduction limits under Section 80D for health insurance premiums. The current ₹25,000 limit could be raised to ₹40,000, and for senior citizens, possibly to ₹75,000.

National Pension Scheme (NPS) contributions

Another key proposal is to increase the ₹50,000 deduction limit under Section 80CCD (1B) for NPS contributions. This would encourage more individuals to plan for retirement.

Housing and rental benefits

Taxpayers in rapidly growing cities are hoping for tax relief related to housing and rental costs.

HRA exemption for metro cities

There is a growing demand for the inclusion of cities like Hyderabad and Bengaluru in the House Rent Allowance (HRA) exemption list. With rising urbanization and increasing rental costs, such a change would provide much-needed relief.

Home loan exemption

Taxpayers are also hoping for an increase in the exemption limit under Section 24 for home loan interest, in light of rising real estate prices.

Slab rate relief for the middle class

A significant expectation is the revision of income tax slab rates. Taxpayers hope for an increase in the threshold for the 30% tax rate, currently applicable to income above ₹15 lakh.

A revision to ₹20 lakh would provide relief to many individuals.

VDA taxation and investment accounts

With virtual digital assets (VDA) gaining popularity, there is a call for reconsidering the 30% flat tax rate on VDAs and the introduction of carry-forward provisions.

This would give investors more flexibility and encourage long-term investment.

Krishna Killa also suggests the introduction of a Tax-deferred 401(k)-type investment account to allow tax deferral for switching between investments.

“This would enable tax deferral for investors, allowing compounding to continue without disruption,” he adds.

Simplifying NRI taxation

Finally, taxpayers are hoping for a simplification of residency rules for Non-Resident Indians (NRIs). This would make NRI taxation clearer and easier to manage.