Sat Feb 01 11:10:00 IST 2025: ## India’s Budget 2025 Expected to Focus on Income Tax Reforms

**New Delhi, India** – India is on the cusp of its Budget 2025 announcement, with Finance Minister Nirmala Sitharaman set to unveil the proposals in Parliament shortly. Significant changes to the income tax system are widely anticipated, following months of speculation and hints from the government.

The Modi government has a history of bold economic decisions, and this budget is expected to be no different. In July, Minister Sitharaman announced a comprehensive review of the 60-year-old Income Tax Act, 1961. The focus is expected to be on further incentivizing the New Tax Regime (NTR), which is already gaining popularity. Over 65% of taxpayers now use the NTR, a significant shift from its initial adoption in 2020.

**Proposed Changes to the New Tax Regime:**

The government is likely to make the NTR even more attractive. Reports suggest the standard deduction could increase from ₹75,000 to ₹100,000. The 20% tax bracket may be extended from incomes between ₹12-15 lakhs to ₹12-20 lakhs. This would provide significant relief for individuals earning between ₹15 and ₹20 lakhs annually, potentially leading to a further shift away from the Old Tax Regime (OTR). There is even speculation that the government might abolish the OTR altogether if NTR adoption surpasses 80%.

The current NTR slabs are:

* ₹0-₹3 lakhs: 0%
* ₹3-₹7 lakhs: 5%
* ₹7-₹10 lakhs: 10%
* ₹10-₹12 lakhs: 15%
* ₹12-₹15 lakhs: 20%
* Over ₹15 lakhs: 30%

Proposed changes could see the 30% tax rate applied only above ₹20 lakhs. Alternatively, the limit for deductions under Section 80C (currently ₹1.5 lakhs) might be increased.

**Potential for a New Income Tax Law:**

Sources indicate a new Income Tax law might be introduced during the budget session, rather than amendments to the existing Act. This new law aims to simplify and clarify the current system, addressing suggestions from the public and industry. Expected changes include using simpler language, removing outdated provisions, reducing tax disputes, and simplifying compliance for taxpayers.

Prime Minister Narendra Modi hinted at significant announcements related to women’s empowerment in Budget 2025, suggesting further social and economic policy shifts. The overall expectation is that Budget 2025 will inspire new confidence in the Indian economy.

Read More