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What are the expectations of a Salaried Taxpayer from Union Budget 2025?

On 1st Feb Finance Minister Mrs. Nirmal Sitharaman will be presenting her consecutive 8th Union Budget, the highest by any Finance Minister of Independent India, as part of MODI 3.0. However, her last full budget presented on July 23rd 2024 disappointed everyone including salaried people, businessmen, Investor as well as Trader.

Traces of unhappiness from the budget were seen immediately on the Indian Share Market. Similarly, the salaried taxpayers are also majorly disappointed as there were no changes proposed in the tax Slabs. Many taxpayers directly/in directly has shown their disappointment by creating meme and on social media. In fact there was no clarity on certain provisions which the Finance ministry clarified in separate notifications.

The NSE Nifty 50 and S&P BSE Sensex started declining significantly and rested after dropping 1 %. The main reason behind this fall was, increase in Capital gain taxes and the increase in Securities Transaction Tax (STT) of Future and Options. Internationally, Indian rupee also was dropped to a record low against the US dollar to ₹ 83.69

Sharp fall in NSE index on 23rd July 2024 when Union budget 2024 was presented

Interestingly from the last 8-9 months, Indian share market, NSE was always on bearish mode. NSE EQ today (31 Jan 2025) is 23492.65. This year as well Government will try to push for New Tax regime and may provide additional benefits. However considering the exemptions available in Old Tax regime, many tax payers have not opted for the New Tax Regime. Main reason is Indexation benefit which is available only In Old Tax regime. So, it will be very interesting to see how Government plays in this budget to get more admirers for New Tax regime.

Salaried taxpayers are hoping for significant relief in the upcoming budget, especially considering the impact of inflation and the rising cost of living. The government may focus on increasing disposable income, simplifying tax regimes, and providing incentives for savings, investments and Insurances. However, the actual measures will depend on the government's fiscal priorities and revenue targets. Overall following are the expectation of a Salaried Employee, a common man, from the budget. ions available in Old Tax regime, many tax payers have not opted for the New Tax Regime. Main reason is Indexation benefit which is available only In Old Tax regime. So, it will be very interesting to see how Government plays in this budget to get more admirers for New Tax regime.

  1. Basic Exemption Limit
    • Expectation: Simplification of the tax structure and an increase in the basic exemption limit (currently ₹2.5 lakh under the old regime).
    • Recommendation:
      • Increase the basic exemption limit to ₹5 lakh to provide relief to lower- and middle-income groups aligning with the rebate under Section 87A.
      • Adjust tax slabs under the new regime to make it more attractive compared to the old regime.
  2. Standard Deduction
    • Expectation: Increase in the standard deduction limit (currently ₹50,000 for salaried individuals and pensioners under Old tax Regime and ₹ 75,000 under the New tax regime).
    • Recommendation: Raise the standard deduction to ₹1 lakh to account for inflation and rising living costs for both regime.
  3. Section 80C Limit
    • Expectation: Increase in the deduction limit under Section 80C (currently ₹1.5 lakh under Old Tax Regime ).
    • Recommendation: Raise the limit to ₹2.5 lakh to encourage savings and investments in instruments like PPF, ELSS, EPF, NSC, Life Insurance, Home Loan Principal etc.).
  4. House Rent Allowance (HRA) Exemption
    • Expectation: Simplification of HRA exemption rules and an increase in the tax-free HRA limit..
    • Recommendation: Allow higher HRA exemptions for metro as well as tier 1 cities, considering the rising cost of rent.
  5. Medical Insurance (Section 80D)
    • Expectation: Increase in the deduction limit for health insurance premiums (currently ₹25,000 for self and family, ₹50,000 for senior citizens).
    • Recommendation: Raise the limit to ₹50,000 for individuals and ₹1 lakh for senior citizens to account for rising healthcare costs.
  6. Education and Skill Development
    • Expectation: Higher deductions for education loans (Section 80E) and skill development courses
    • Recommendation: Increase the scope of Section 80E to include vocational training and upskilling programs.
  7. Tax Relief for Homebuyers
    • Expectation: Increase in the deduction limit for home loan interest (currently ₹2 lakh under Section 24).
    • Recommendation: Raise the limit to ₹5 lakh to boost the real estate sector and provide relief to homebuyers.
  8. Simplification of Tax Regimes
    • Expectation: Make the new tax regime more attractive by allowing some deductions and exemptions.
    • Recommendation: Allow deductions under Section 80C, 80D, and HRA in the new tax regime to make it a viable option for salaried individuals.
  9. Pension and Retirement Benefits
    • Expectation: Higher tax-free limits for pension income and retirement benefits.
    • Recommendation: Increase the tax-free pension limit to ₹5 lakh for senior citizens
  10. Reduction in Surcharge
    • Expectation: : Reduction in the surcharge on high-income earners (currently up to 37% for income above ₹5 crore).
    • Recommendation: Cap the surcharge at 25% to reduce the tax burden on high-income salaried individuals.
  11. Reduction in LTCG, STCG Tax on Equity Investments
    • Expectation: • Currently, long-term capital gains (LTCG) on equities above ₹1.25 lakh are taxed at 10%.
    • Recommendation:
      • Increase exemption limit from ₹1 lakh to ₹2 lakh.
      • Reduce LTCG tax from 12.5% to 10% to encourage stock market participation.
      • Reduce STCG tax from 20% to 10% to encourage more participation in stock market
  12. Higher Employer Contribution Exemption (EPF/NPS)
    • Expectation: Increase this limit to ₹10 lakh to promote retirement savings.
    • Recommendation: Raise the limit to ₹2.5 lakh to encourage savings and investments in instruments like PPF, ELSS, EPF, NSC, Life Insurance, Home Loan Principal etc.).

References


Legal Disclaimer: The information provided is based on the current laws for FY 2025-26, FY 2024-25 and FY 2023-24 and readers should verify details with relevant authorities. Keep in mind that the process and options might vary slightly based on updates to the Income Tax e-Filing portal or changes in procedures, so it is a good idea to refer to the latest guidance available on the portal.


Union Budget 2024: What's in Store for Salaried Individuals?

The Union Budget 2024 was presented by FM Nirmala Sitharaman on 23rd July 2024. Traces of unhappiness from the budget were seen immediately on the Indian Share Market. Similarly, the salaried taxpayers are also majorly disappointed as there were no changes proposed in the tax Slabs. Many taxpayers directly/in directly shown their disappointment by creating meme and on social media platform.
Let's try to analyze and understand, the impact of proposed changes on salaried employees.

  1. Tax slab changes for New Regime
    2. In the budget, following Tax slab changes are announced under New tax regime.
    • Please note there are no changes in the Tax slabs under Old tax regime.
    • Similarly, the Health and Education cess and Surcharge is unchanged.
    With these changes, the Tax slabs applicable for New Tax regime and Old tax regime are:
  2. Standard Deduction
    3. Standard deduction to salaried individuals and pensioners is proposed to be increased from ₹ 50,000 to ₹ 75,000 under the New tax regime.
    Please note for the Salaried individuals and Pensioners opting for the Old Tax regime applicable standard deduction will be ₹ 50,000 only.
  3. Family Pension Deduction
    4. Deduction u/Sec 57(IIA) from family pension of ₹ 15,000 is increased to ₹ 25,000 under the New tax regime.
    Please note no change for the Old Tax regime.
  4. New Pension Scheme Contribution
    5. Private employees in the New Tax regime shall be allowed a deduction of an amount up to 14 % of the employee’s basic salary in place of 10 %.
    No changes for employees under Old tax regime
  5. Changes in Income from House Property
    6. It is proposed that income from letting out of a house or part of the house by the owner, shall not be charged under the head ‘profits and gains of business or profession’ and will be chargeable to tax under the head ‘income from house property’ only.
  6. Changes in Capital Gain Taxes
    7. Following are the changes proposed in the union budget with immediate effect.
    • Short Term Capital Gain
      1. Short term capital gains on specified financial assets like shares of listed companies, shall charge tax rate of 20 % instead of 15 %.
      2. Listed financial assets held for less than a year are classified as short term.
      3. Unlisted financial assets and all non-financial assets held for less than two years are classified as short-term.
    • Long Term Capital Gain
      1. Long term gains on all financial and non-financial assets will attract a tax rate of 12.5 % instead of 10 %.
      2. The limit of exemption on certain listed financial assets has increased from ₹ 1 lakh to ₹ 1.25 lakh per year.
      3. Listed financial assets held for more than a year will be classified as long term, while unlisted financial assets and all non-financial assets will have to be held for at least two years to be classified as long-term.
  7. Securities Transaction Tax (STT) rates
    8. It is proposed to increase the rates of STT on sale of an Option in securities from 0.0625 % to 0.1 % of the option premium, and on sale of a futures in securities from 0.0125 per cent to 0.02 % of the price at which such futures are traded.
  8. Buy-back of shares
    9. It is proposed that the income from buy-back of shares by companies be chargeable in the hands of the Recipient investor as dividend, instead of the current regime of additional income-tax in the hands of the company. Further, the cost of such shares shall be treated as a capital loss to the investor.

References


Legal Disclaimer: The information provided is based on the current laws for FY 2024-25, FY 2023-24 and FY 2022-23and readers should verify details with relevant authorities. Keep in mind that the process and options might vary slightly based on updates to the Income Tax e-Filing portal or changes in procedures, so it is a good idea to refer to the latest guidance available on the portal.


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Impact of Union Budget 2024 on Investors and Traders

The Union Budget 2024 was presented by FM Nirmala Sitharaman on 23rd July 2024. Traces of unhappiness from the budget were seen immediately on the Indian Share Market. The NSE Nifty 50 and S&P BSE Sensex started declining significantly and rested after dropping 1 %. The main reason behind this fall was, increase in Capital gain taxesand the increase in Securities Transaction Tax (STT) of Future and Options. Internationally, Indian rupee also was dropped to a record low against the US dollar to ₹ 83.69

    Let’s understand the proposed changes in Union Budget
  1. Changes in Capital Gain Taxes
    2. Following are the changes proposed in the union budget with immediate effect.
    • Short Term Capital Gain
      1. Short term capital gains on specified financial assets like shares of listed companies, shall charge tax rate of 20 % instead of 15 %.
      2. Listed financial assets held for less than a year are classified as short term.
      3. Unlisted financial assets and all non-financial assets held for less than two years are classified as short-term.
    • Long Term Capital Gain
      1. Long term gains on all financial and non-financial assets will attract a tax rate of 12.5 % instead of 10 %.
      2. The limit of exemption on certain listed financial assets has increased from ₹ 1 lakh to ₹ 1.25 lakh per year.
      3. Listed financial assets held for more than a year will be classified as long term, while unlisted financial assets and all non-financial assets will have to be held for at least two years to be classified as long-term.
  2. Changes in Capital Gain Taxes
    3. Following are the changes proposed in the Union budget with immediate effect.
    • Short Term Capital Gain
      • Short term capital gains on specified financial assets like shares of listed companies, shall charge tax rate of 20 % instead of 15 % . Listed financial assets held for less than a year are classified as short term. Unlisted financial assets and all non-financial assets held for less than two years are classified as short-term.
    • Long Term Capital Gain
      • Long term gains on all financial and non-financial assets will attract a tax rate of 12.5 % instead of 10 %. The limit of exemption on certain listed financial assets is increased from ₹ 1 lakh to ₹ 1.25 lakh per year . Listed financial assets held for more than a year will be classified as long term, while unlisted financial assets and all non-financial assets will have to be held for at least two years to be classified as long-term.
  3. Securities Transaction Tax (STT) rates
    4. It is proposed to increase the rates of STT on sale of an Option in securities from 0.0625 % to 0.1 % of the option premium, and on sale of a futures in securities from 0.0125 % to 0.02 % of the price at which such futures are traded.
  4. Buy-back of shares
    5. It is proposed that the income from buy-back of shares by companies be chargeable in the hands of recipient investor as dividend , instead of the current regime of additional income-tax in the hands of the company. Further, the cost of such shares shall be treated as a capital loss to the investor

References


Legal Disclaimer: The information provided is based on the current laws for FY 2024-25, FY 2023-24 and FY 2022-23and readers should verify details with relevant authorities. Keep in mind that the process and options might vary slightly based on updates to the Income Tax e-Filing portal or changes in procedures, so it is a good idea to refer to the latest guidance available on the portal.


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