Announcement:
Union Finance Minister Nirmala Sitharaman is set to announce Union Budget 2025-2026 on February 1
Is Social Media trolls on tax demanding the changes in Government Policies?
A year back when the govt announced 2024-2025 budget the various negative reactions started to grow in all social media channels. We all experienced the negative aura in the country over the tax on caramel popcorn. These policies and the tax system got disagreed by the whole country and the trolls on government circulated around the internet. Report says major changes may happen in the upcoming year’s budget and these changes might be in the favor for tax payers.
A big Relief to Tax payers
As a relief to taxpayers, the upcoming Union Budget 2025-2026 may see specific changes to the new administration. These changes include Annual income of up to Rs 10 lakh tax free and Introducing a new 25% tax scheme for annual income between Rs 15 lakh and Rs 20 lakh. Salaried taxpayers eagerly await tax reductions under both the tax government from the annual budget.
Currently, Under the new tax administration salaried taxpayers earning up to Rs 7.75 lakh per annum effectively have no tax liability, with Rs 75,000 standard deduction is placed on the income. Individuals earning over Rs 15 lakh per annum fall under the highest tax slab of 30%.
Budget may offer financial support to small businesses
The government may announce a package of measures to boost financial support, including credit for small businesses to address a long standing problem faced by two crucial segments. This announcement is expected in the budget. The commerce department has already held discussions with the finance ministry on ensuring that there is adequate credit flow and availability of other instruments, such as factoring and credit guarantee for exporters, who have been complaining about these being a big drag on their competitiveness.
In fact, post covid-19, the guarantee-based loans extended by banks were seen as a huge help for businesses to access capital at reasonable rates, while banks lent freely without fearing large bad debt.
According to the latest RBI data, in the current financial year, loans to micro and small enterprises have grown 4.3%, while those to medium sized businesses were up 12%. Overall growth is to the tune of 6.6%
Opportunity to transform the insurance sector
The Union Budget 2025 presents an opportunity to transform the insurance sector. Policy measures like increasing the FDI limit to 100%, reducing the NOF (Net Owned Fund) requirement to ₹50 crore, introducing composite licenses for insurers, and enabling an open architecture for individual agents can foster greater competition, innovation, and efficiency in the sector. On the taxation front, we hope to see rationalization of GST rates on health and life insurance which will make insurance products more affordable and accessible for all
Rationalize income tax slabs under new tax-free Government:
As the economy is gradually shifting towards the new tax regime in a discretionary manner, it becomes imperative to rationalize tax slabs in the absence of major deductions and other incentives. The proposal to introduce an additional tax slab of 25% for income levels between INR 15 lakhs to 20 lakhs will surely provide significant tax relief and increase disposable income. Increased liquidity in the hands of individuals will hold higher potential to spur consumption. Additionally, the proposal to exempt income tax up to INR 10 lakhs will surely scale-up liquidity in the hands of middle-class salaried individuals.
What Government reports are saying about the Decision
“We are evaluating both options. If our budget allows, we may implement both measures – making income up to Rs 10 lakh tax-free and introducing a 25 percent slab for income between Rs 15 lakh and Rs 20 lakh,” a government source told the publication. He further said that the government is prepared to absorb the revenue loss of Rs 50,000 crore to Rs 1 lakh crore as an impact of such income tax relief.
Speculations from Finance Experts
- Notably, the Global Trade Research Initiative (GTRI) has speculated significant tax reforms ahead of the Union Budget 2025-26.
- The think tank suggested raising the income tax exemption threshold to Rs 5.7 lakh, adjusted for inflation.
- GTRI also proposed increasing fixed deductions and exemptions, such as raising the Rs 10,000 deduction for savings interest to Rs 19,450 by 2025 and adjusting the Rs 1.5 lakh deduction for insurance premiums and PF contributions to Rs 2.6 lakh.
- The think tank emphasised on the need for inflation-indexed tax slabs and exemptions to preserve the real value of benefits for taxpayers
Final Verdict:
Budget 2024 had made big changes to the capital gains tax framework, offering both challenges and benefits for investors. Some provisions need a relook.
We believe that unlike last year, Finance Minister Nirmala Sitharaman will not spring a surprise this year in the form of a hike capital gains tax and also while the government could look at some tax measures to boost consumption at a time when growth has taken a hit, the budget will only have a limited impact in terms of acting as a catalyst for reviving growth or earnings. Will FM Nirmala Sitharaman lower income tax rates to boost consumption, GDP growth? This is the most speculating question for the whole country and how the government changes the tax burdens on middle class people. The outcomes are expected to benefit and the awaited taxpayers might get a big relief.
