Experts suggest that the proposed changes, if implemented, could greatly ease the tax burden on middle-class and salaried individuals.
Commenting on the potential impact, CA Dr. Suresh Surana stated, “If the government approves the suggested revisions in the upcoming budget, it will notably reduce the tax liability for the middle-income group and salaried employees, granting them increased disposable income.”
“A new 25% tax slab for the ₹15 lakh to ₹20 lakh income range would lower the marginal tax rate for individuals within this bracket,” said Raheel Patel, partner at Gandhi Law Associates.
However, Patel noted that the actual impact of the proposed tax cuts would rely on factors such as the continuation of current deductions, surcharges, and any other adjustments introduced in the budget.
Under the current new tax regime, salaried individuals earning up to ₹7.75 lakh do not have to pay any income tax. This is due to the availability of a standard deduction of ₹75,000 and the rebate provided under Section 87A of the Income-tax Act, 1961.
Income Tax Slabs for 2025
Income tax slabs in India are structured ranges of annual income that define the tax rates applicable to individuals. These slabs are designed to implement progressive taxation, where individuals with higher incomes are taxed at higher rates. Tax slabs can differ based on factors such as age, annual income, and the chosen tax regime (old or new).
The government updates these slabs periodically, often during the Union Budget announcement, to align with changing economic conditions and taxpayer needs. For the financial year 2025-26, taxpayers eagerly await potential revisions that could ease their tax burden.
Every year, taxpayers navigate these slabs to calculate their liabilities while factoring in exemptions, deductions, and rebates to optimize their tax payments. With expectations of changes in the upcoming Union Budget, taxpayers are hopeful for a more favorable tax structure.
Income Tax: Raise 30% Tax Slab to ₹18 Lakh – Here’s Why
Budget 2025 Income Tax: As the Union Budget 2025 approaches, there are growing calls for reforming the income tax structure. Adhil Shetty, CEO of BankBazaar, has suggested that Finance Minister Nirmala Sitharaman should raise the threshold for the 30% tax slab to ₹18 lakh. This proposal, if implemented, could provide much-needed relief to taxpayers in higher income brackets.
Key Suggestions by BankBazaar
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Increase the 30% Income Tax Slab Threshold
- The current 30% tax rate applies to individuals earning more than ₹15 lakh annually. Raising this threshold to ₹18 lakh would reduce the tax burden for a significant number of middle-income and high-income taxpayers.
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Introduce Flat 30% Deductions
- BankBazaar suggests the government introduce a flat 30% deduction on taxable income. This would simplify tax calculations and provide equitable benefits across income groups, encouraging more people to opt for the new tax regime.
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Align with Economic Growth
- Increasing the threshold aligns with rising incomes and inflation, ensuring taxpayers retain more disposable income while boosting spending power.
Why This Change Matters
Raising the 30% slab limit would make the tax system more equitable and provide relief to salaried individuals and professionals. It could also increase compliance as taxpayers find the system more favorable and transparent.
As taxpayers await Budget 2025, these reforms could serve as a significant step toward creating a more inclusive and simplified tax structure.
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