Lagatar24 Desk
New Delhi: With Finance Minister Nirmala Sitharaman set to present the Union Budget 2025 on February 1, expectations are high among taxpayers regarding potential tax reliefs and policy reforms. This will mark Ms. Sitharaman’s eighth budget presentation, where she will unveil key fiscal policies, revenue plans, and expenditure priorities for the coming financial year.
In the past two Budgets, the government introduced significant reforms, including the Concessional Tax Regime (CTR), which provided revised tax slabs for increased savings. Experts anticipate further changes in tax exemption limits, deductions, and relief measures to benefit individuals.
Expected Tax Reliefs For Individuals
Tax expert Rama Karmakar, Partner at EY India, predicts that the government may raise the basic exemption limitunder the CTR from ₹3 lakh to ₹5 lakh, providing relief to low and middle-income earners. Additionally, those opting for the old tax regime are hopeful for revised tax slabs to enhance savings.
1. Increased HRA Exemptions for Metropolitan Cities
Karmakar highlighted the House Rent Allowance (HRA) exemption, which is currently capped at 50% of basic salary for metropolitan cities and 40% for others. He suggested that rapidly growing cities like Bengaluru, Hyderabad, Gurgaon, and Pune should be classified as metropolitan cities to allow taxpayers a higher HRA exemption.
2. Enhanced Tax Deduction on Home Loan Interest
Currently, the tax deduction cap on home loan interest under the old tax regime is ₹2 lakh. Experts argue that increasing this cap would provide greater financial relief to homebuyers and stimulate the real estate sector.
3. Clarity on Taxation of Electric Vehicles (EVs) for Employees
With the growing adoption of electric vehicles (EVs), many companies offer EVs to employees for official and personal use. However, there is ambiguity in perquisite valuation for tax purposes. Karmakar emphasized the need for clear taxation guidelines on EVs provided to employees.
4. Provident Fund (PF) Taxation Relief
The Budget may also bring relief by deferring taxability on interest earned on Provident Fund (PF) contributions, providing more savings for employees.
5. Expansion of ESOP Tax Deferral Benefits
Currently, Employee Stock Option Plan (ESOP) tax deferral is only available for employees in certain eligible startups. Karmakar suggested extending this tax deferment until the point of sale for all companies, ensuring a uniform tax structure for employees across industries.
Boosting Disposable Income And Consumer Spending
According to experts, these potential changes in the Union Budget 2025 would streamline tax processes while putting more disposable income in the hands of taxpayers. This, in turn, could increase consumer spending, boost demand, and further stimulate economic growth.
