Budget 2025: Here Are The Key Expectations On Income Tax

Every year, income tax is perhaps the most talked-about subject ahead of the announcement of the Union Budget. This year is no different. With just 10 days to go for the Modi 3.0 government's second budget, expectations are on the rise among taxpayers on multiple fronts. The highlight of income tax-related expectations, however, is the new Income Tax Bill.

The Centre, in the upcoming Union Budget 2025, is likely to propose the new Income Tax Bill, aiming to replace the old Income Tax Act, 1961, people in the know told NDTV Profit.

According to the sources, the Bill will be implemented later in the year after consultation with all stakeholders. The intent of the government, as per a source, is to simplify the language of the direct tax laws and make it taxpayer-friendly.

While a possible new income tax bill might make perhaps the biggest headlines of this year's budget, here's what experts are anticipating on the income tax front from Finance Minister Nirmala Sitharaman.

Dhruv Chopra, Managing Partner, Dewan P.N. Chopra & Co., expects the government to provide tax relief while balancing the need to maintain revenue.

"Taxpayers are hoping for an enhanced rebate for lower-income individuals and an increase in the basic exemption limit under both tax regimes to help offset inflation," said Chopra.

"To help conserve taxpayers' resources, the turnover limit for taxation on a presumptive basis under Sections 44AD (for businesses) and 44ADA (for professionals) should be increased," he added.

According to Chopra, homebuyers may also benefit from a higher interest deduction limit on housing loans under Section 24(b). The deduction should be allowed for the full interest paid, at least for one house, or the current limit of Rs 2 lakh should be increased to Rs 3 lakh, he stated.

The government is expected to build on the "momentum of 2024 union budget reforms aimed at supporting taxpayers and small businesses," says Mohit Gang, CEO at MoneyFront.

"We expect relief in income tax exemption and MSME benefits with an increase in the exemption limit to ₹3 lakhs and the 80C limit to ₹2.5 lakhs, thereby benefiting more than 6 crore taxpayers and increasing household savings by ₹25,000 crores per annum. Moreover, MSMEs will save another ₹5,000, thereby supporting their growth and sustainability," said Gang.

According to former Central Board of Direct Taxes Chairman JB Mohapatra, the government should focus on reducing taxes on gains on bank deposits, adjusting income tax exemption limits and raising fixed deductions to keep pace with inflation.

Vikram Marwaha, Joint Managing Director, DRRK Foods, also hopes the government will consider lowering personal income taxes or ensure no additional burden on individuals. Increased disposable income in the hands of consumers plays a pivotal role in driving demand for quality products, he said, adding that a supportive tax structure not only boosts consumption but also encourages people to invest in healthier food choices, aligning with national health goals.

"A balanced budget that supports both corporate growth and consumer purchasing power will pave the way for sustained economic progress."

The real estate sector is hopeful that the budget will amplify its growth by raising the tax deduction limit for housing loan interest under Section 24(b).

"Increasing the tax deduction limit for housing loan interest under Section 24(b) to ₹5 lakh would align with the rising aspirations of homebuyers while addressing evolving market conditions," according to Vivek Singhal, CEO, Smartworld Developers.