Finance Minister Nirmala Sitharaman's eighth consecutive Union Budget, presented on February 1, 2025, brought significant changes to India's income tax structure and made strides to bolster healthcare, especially for seniors. Anticipations of relief measures aimed at easing tax burdens dominated discussions prior to the budget reveal, setting the stage for what many hope will be a landmark shift for taxpayers across the nation.
Foremost among the announcements was the introduction of new income tax slabs. The 2025-26 budget proposed establishing a new tax bracket between Rs 15,00,000 and Rs 20,00,000, taxed at 25%. This move aims to alleviate financial pressures for many individuals earning within this range, with many taxpayers expressing relief at the adjustments. According to experts, those earning over Rs 20,00,000 will continue to face the existing tax rate of 30%, ensuring the government maintains revenue for public services.
Interestingly, the basic tax exemption limit was also increased from Rs 7,00,000 to Rs 7,50,000. This change means taxpayers making up to Rs 7,50,000 annually will be exempt from income taxes. Financial analysts welcome this modification; it reflects the government's commitment to supporting low and middle-income earners.
"This budget reflects the government’s intention to lighten the tax burden on the working middle class," remarked Nirmala Sitharaman during the budget presentation, underscoring the government's commitment to economic growth cascading from tax relief measures.
Following the Prime Minister's invocation of Goddess Lakshmi's blessings for prosperity for the middle-class and poor, sentiment buoyed among taxpayers, eager for relief. With the budget being discussed extensively, corporate India awaited anticipated policies targeting their lower tax burdens, viewing tax relief as pivotal for stimulating economic growth.
Among the discussions was the fate of the National Pension System (NPS). The previous budget expanded NPS benefits for salaried employees, enabling them to claim up to 14% of their basic salary as tax-free contributions under the new regime. Moving forward, experts urged the government to extend similar advantages to self-employed individuals as well. Expanding NPS incentives could encourage higher participation rates and offer substantial financial security for retirees.
Senior citizens had their eyes firmly fixed on the budget, seeking specific measures aimed at easing their financial strains. Currently, tax experts advocate enhancing the basic exemption limit for those aged 60 and above from Rs 3,00,000 to between Rs 5,00,000 and Rs 10,00,000. This increase would greatly alleviate the taxing woes faced by retirees across the nation.
Highlighting these concerns, Sitharaman indicated, "The government is aware of the senior citizens' needs and is exploring ways to provide them with enhanced support through various programs. Their well-being is important to us as we strive to boost healthcare and financial relief initiatives."
The continuation of programs like Ayushman Bharat, expanded to cover individuals older than 75 years, offered hope of greater healthcare availability. Many experts stress the continued necessity of such health initiatives, especially with growing elder populations.
Tax benefits related to housing loans also emerged as prominent discussions. Ritika Nayyar, Partner at Singhania & Co, noted, "Raising the interest deduction cap on housing loans from Rs 2,00,000 to Rs 3,00,000 would significantly benefit first-time homebuyers who often exhaust their savings for such investments." Promoting homeownership through beneficial tax policies aligns with the government's goal to stimulate the economy.
While the government continues to phase out the old tax regime due to modernisation efforts, Finance Minister Sitharaman previously stated, "Indian citizens will make their own choices. It is one thing to create an appealing system, but many taxpayers still prefer the old regime due to its multiple tax benefits." This acknowledgment indicates the government plans to avoid forcing shifts, allowing taxpayers to choose their preferred structures.
Investors and taxpayers are now gearing up to analyze the full impact of the adjustments showcased within the budget, hoping these changes will lead to enhanced financial growth and stability for years to come. The focus now rests on how effectively these initiatives are rolled out and whether they genuinely translate to improved economic conditions for all segments of society.
On the whole, the 2025-26 Indian budget tries to strike a balance by catering to the needs of the taxpayer, especially among the middle-class demographic, signalling the government's commitment to progressive taxation and economic growth. If successfully implemented, these new measures potentially hold the key to rejuvenate the economy—setting the tone for hopeful financial prospects.