As the Union Budget 2025 approaches, growing expectations suggest that the government is actively considering personal tax relief measures aimed at boosting consumption and accelerating economic recovery. Sources have revealed that the government is exploring personal income tax breaks, which could significantly impact individuals' disposable income, ultimately driving economic growth.
Key Proposals for Tax Relief
The government is reportedly evaluating two primary options for personal income tax relief, with the goal of making the new tax regime more attractive for taxpayers. The first proposal includes raising the standard deduction limit from ₹75,000 per annum, which would provide immediate relief to salaried and pensioned individuals. This move is expected to leave individuals with more disposable income, encouraging increased consumer spending.
The second proposal involves adjustments to the tax slabs within the new tax regime. There are two key options under consideration:
- Expanding the 20% tax slab to include individuals earning between ₹12 lakh and ₹18 lakh, or even up to ₹20 lakh annually.
- Raising the 30% tax rate to apply to incomes exceeding ₹18 lakh or ₹20 lakh, aligning it more closely with existing tax structures while offering targeted relief to middle-income earners.
Currently, individuals earning between ₹12 lakh and ₹15 lakh fall under the 20% tax bracket, while those earning above ₹15 lakh are taxed at the higher 30% rate.
Boosting Economic Activity
The government believes that these potential tax breaks could significantly increase disposable income, leading to enhanced consumer spending - an essential factor for economic recovery. The increased expenditure is expected to benefit both direct tax receipts and GST collections, providing a crucial boost to the government's fiscal health.
Uncertainty Surrounding Final Decisions
However, while these proposals are under discussion, sources have noted that the final decision on tax relief measures will be made closer to the budget date. Senior officials from the Finance Ministry and the Prime Minister's Office (PMO) will finalize the proposals in the coming weeks.
Economic Growth Outlook
According to the National Statistical Office (NSO), the Indian economy is projected to grow by 6.4% in 2024-25, a significant slowdown from the 8.2% growth seen in the previous fiscal year. This projection, the lowest since the pandemic, indicates a slowdown in consumer spending, underscoring the importance of these proposed tax relief measures to stimulate the economy.
As the budget date draws nearer, all eyes will be on whether these proposals will make it into the final Union Budget for 2025, offering much-needed relief to taxpayers and supporting the recovery of the broader economy.
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