Budget 2025: Know What Salaried Class Expects From Modi 3.0’s Second Budget Presentation

The Union Budget for FY 2024-25 is scheduled to be presented on February 1. People from all walks of society look forward to the presentation of the Budget as the government announces various schemes and amendments to existing laws which may impact them.

Salaried employees are eagerly waiting for the presentation of the Union Budget in hopes of announcements related to income tax relief or other such key announcements. Ahead of the Union Budget global accounting firm KPMG which offers Audit, Tax and Advisory services shared some of the key pre-budget expectations that the salaried class has from the Budget.

The firm told Outlook Money that it expects the government to introduce potentially stable income slabs and taxation rates. However, KPMG said that with the increasing adoption of the New Tax Regime, the changes in income tax slab rates are likely to be minimal. On the other hand, the income tax slabs under the old tax regime are unlikely to be changed this year.

“Over the last 3-4 years the Government has made a conscious effort to make the income slabs and corresponding tax rates more lucrative for taxpayers opting for the new tax regime. In fact, the new tax regime tax slabs have been altered in Budget 2023 as well as the interim Budget of 2024. This thrust has yielded results as per the statistics released by the Government itself. While there is always an expectation from the common man to get more net disposable income in their hands, on a realistic basis it is expected that there may be no changes to the income slabs and tax rates in the old tax regime and minimal changes (if any) in the new tax regime,” KPMG said.

The firm also expects the government to introduce tax sops to make housing more accessible for middle and low-income salaried employees. The government might consider the launch of tax sops such as a provision for deduction of interest paid on housing loans in the new tax regime. Additionally, the firm said that the government consider raising the tax deductible limit for home loans available under the old tax regime to Rs 3 lakh from the current limit of Rs 2 lakh.

“It is widely expected that the Government may consider some tax sops for the housing and funding cost for the middle- and low-income earners.  In the context of a self-occupied property, the new default tax regime disallows any deduction for interest on housing loans. Conversely, the old tax regime permits a deduction of up to only Rs 2 lakhs. This distinction is crucial as buying a home and securing a loan for self-occupation are substantial financial commitments, often spanning long periods. The Government may reconsider allowing deductions for interest on self-occupied housing loans even under the new default tax regime or enhancing the deduction in the old tax regime to at least Rs 3 lakh,” the firm told Outlook Money.

Nisary Mahesh the Founder and CEO of HerMoneyTalks a financial platform told Outlook Money that the salaried class has some key expectations from the Union Budget such as an increase in the basic income tax exemption limit, adjustments to the income tax slabs and enhanced standard deductions.

“Salaried class in India often have high expectations from the Union Budget, primarily seeking relief in taxation and measures to increase disposable income. A key demand is an increase in the basic income tax exemption limit or adjustments in tax slabs to account for inflation. Many also look forward to enhanced standard deductions, tax benefits on housing loans, and deductions under Section 80C for investments and savings,” Mahesh said.

Mahesh added that other key reforms such as reduced GST rates, enhanced clarity on tax policies and a simplification of the income tax return filing process are also expected by the salaried class. Additionally, Mahesh also said that the salaried class also anticipates the introduction of provisions to address rising healthcare costs.

“Additionally, reforms such as reduced GST rates on essential goods and services, greater clarity on tax policies, and simplification of tax filing processes are anticipated. Provisions to address rising healthcare costs, such as higher exemptions for medical expenses and health insurance premiums, are also on the wish list. Overall, the salaried class hopes for a budget that alleviates financial burdens and provides incentives to save and invest,” Mahesh said.

Dipesh Jain a Partner at full-service law firm Economic Laws Practice who has expertise in taxation and investment funds said that the rebate amount offered under the 87 A of the Income Tax Act may be hiked to Rs 10 lakh from the existing Rs 7 lakh under the new tax regime in the presentation of the Union Budget for 2025.

“Some breakthrough reliefs expected in the upcoming budget 2025 are - an increase of rebate under section 87A to Rs 10,00,000 as compared to the previous Rs 7,00,000 provided under the new tax regime,” Jain told Outlook Money.

KPMG said that the government might hike the deduction limit towards health insurance under section 80D of the Income Tax Act. The firm said that in order to offer salaried employees some relief amid rising medical costs, the government may increase the deduction limit for health insurance to Rs 1.5 lakh. Presently the deduction offered under Section 80D ranges from Rs 25,000 to Rs 1 lakh.

“With advancement in healthcare and spiralling medical costs, there is an expectation to increase the current deduction towards health insurance which ranges from Rs 25,000 to Rs 1 lakh (depending on the family member for whom the insurance is taken and his/ her age) to Rs 50,000 to Rs 1.5 lakh,” KPMG said.

Jain also mentioned that the government may introduce a standard deduction on a percentage basis in the upcoming budget. He added that other key expectations that the middle class has include the introduction of a 30 per cent income tax base rate for high-income earners who make Rs 15 lakhs to Rs 20 lakh per annum and provisions for deductions related to NPS.

“Offering the standard deduction on the percentage basis say in a range of 20-30 per cent of the income earned, shifting the maximum income tax base rate of 30 per cent from Rs 15,00,000 to Rs 20,00,000, availability of deduction related to National Pension Scheme (‘NPS’) under the new tax regime to augment savings in the hands of taxpayers especially those taxpayers coming in lower tax brackets,” Jain said.