As Budget 2025 approaches, all eyes are on the finance minister, especially those of the salaried class. One of the biggest questions taxpayers have is whether the standard deduction limit will be increased to provide much-needed relief.
Current Standard Deduction Limits
Under the existing income tax laws:
- The new tax regime offers a standard deduction of ₹75,000.
- The old tax regime provides a standard deduction of ₹50,000.
What Is Standard Deduction?
The standard deduction is a fixed amount subtracted from salary or pension income, reducing taxable income without requiring any documentation. This simplifies tax filing while offering direct tax relief to both salaried individuals and pensioners.
Will Budget 2025 Increase the Standard Deduction Limit?
Experts believe that Budget 2025 could bring relief to the salaried class by raising the standard deduction limit. A proposed increase to ₹1 lakh under both tax regimes would reduce tax liability, leaving more disposable income in the hands of taxpayers. This, in turn, could boost consumer spending and stimulate economic demand.
However, the government’s decision will depend on fiscal priorities and the broader economic landscape. While a significant revision may be unlikely given ongoing discussions about the Direct Tax Code (DTC), there is speculation that an increase in the standard deduction under the new tax regime could encourage more individuals to switch to it.
Economic and Public Demand for Higher Standard Deduction
With rising inflation and increased living costs, particularly in metro cities, a higher standard deduction would help middle-class taxpayers manage expenses better. Many experts argue that a fair approach would be to set the standard deduction at a minimum of ₹1.20 lakh per year, considering that most salaried individuals already spend ₹10,000 per month (₹1.20 lakh annually) on transport and medical expenses.
Will Budget 2025 Deliver?
The government has faced public demand for tax relief due to high tax rates across the board. Media speculation suggests that Budget 2025 may address these concerns by increasing the standard deduction, which could be a welcome move for taxpayers and the economy alike.
As anticipation builds, taxpayers await the finance minister’s decision—will Budget 2025 provide the much-needed relief and support economic momentum? Only time will tell.
