Budget 2025: As Finance Minister Nirmala Sitharaman prepares to present Union Budget 2025 on February 1, salaried people are expecting some relief in terms of income tax liability. Experts believe that the threshold should be changed as it has remained unchanged at Rs 2.5 lakh since 2014 in the old tax regime.
Old tax regime
Under the old tax regime, Income from Rs 2.5-5 lakh attracts 5 per cent tax, and 20 per cent for income between Rs 5 lakh and Rs 10 lakh. A 30 per cent tax is levied on income above Rs 10 lakh.
New tax regime
On the other hand, the new tax regime exempts income up to Rs 3 lakh. Those earning annually between Rs 3-7 lakh pay 5 per cent tax, Rs 7-10 lakh (10 per cent), Rs 10-12 lakh (15 per cent), Rs 12-15 lakh (20 per cent) and above Rs 15 lakh (30 per cent).
Currently, individuals can opt to pay income tax under the old I-T regime or the new I-T regime. While the former offers a host of exemptions and deductions, the latter is devoid of deductions but has a lower rate of tax.
Raise income tax exemption threshold
Think tank Global Trade Research Initiative (GTRI) has suggested that the Budget should raise the income tax exemption threshold to Rs 5.7 lakh to match inflation, simplify the TDS system, and equalise tax treatment for bank deposits and equities,
How much should be the limit?
Adjusted for an annual inflation rate of 5. 7 per cent, Rs 2.5 lakh in 2014 is equivalent to just Rs 1.4 lakh today. To maintain the same real value, the threshold under the old regime of individual taxation should reasonably have been Rs 5.7 lakh.
This adjustment is necessary to ensure that tax levels remain consistent with 2014 standards, GTRI said.
It said the minimum wage for a skilled worker in Delhi is Rs 21,917 per month or Rs 2.63 lakh per annum. Many lower-income professionals, such as drivers or multi-tasking staff, could be spared of tax return filing.