Union Budget 2025: Major Tax Relief For Salaried Employees Coming Soon?

The salaried class may receive positive news with the Union Budget 2025-26, set to be announced by Finance Minister Nirmala Sitharaman on February 1. The government is reportedly considering changes to income tax slabs and increasing the standard deduction to ease middle-class concerns amid rising inflation.

Expected Changes in Tax Structure

The current tax system, which sets a basic exemption limit at ₹3,00,000, has come under fire for being outdated considering the soaring cost of living. Experts suggest that this threshold may be raised, offering significant relief to small taxpayers by lowering their tax liabilities and simplifying compliance.

What Experts Say

Akhil Chandna, Partner at Grant Thornton Bharat, stressed the urgency for effective reforms, noting, "Taxpayers are optimistic about measures that tackle their immediate financial challenges. The 2025 Union Budget is likely to lower personal income tax rates, especially for individuals earning up to ₹15 lakh annually, across both the old and new tax frameworks."

Chandna further acknowledged the necessity of increasing the basic exemption limit, explaining, "Raising the basic exemption limit would provide considerable relief for small taxpayers by reducing compliance costs and facilitating easier tax filing. Furthermore, lowering the surcharge for high-income earners could help decrease the maximum marginal tax rate."

He also suggested linking deductions to salary percentages to promote fairness across income groups. "The new tax regime currently provides a standard deduction of ₹75,000 for all income groups. To ensure parity between salaried and non-salaried individuals, the government should introduce progressive deduction standards based on a percentage of salary," Chandna proposed.

Union Budget 2025: Other Key Expectations

Taxpayers may also see additional deductions for essential expenses such as health insurance, life insurance premiums, and home loan interest payments, making the new tax regime more appealing.

Grant Thornton's Union Budget 2025 Pre-Budget Expectations Survey found that 63% of taxpayers seek increased deduction limits under the old tax regime.

Current Tax Rates and Comparisons

Under the revised new tax regime established in Budget 2024:

- Income up to ₹3 lakh is tax-free.
- Income ranging from ₹3 lakh to ₹7 lakh is taxed at 5%.
- Income exceeding ₹15 lakh is taxed at 30%.

In contrast, the old tax regime allows various deductions, including ₹1.5 lakh under Section 80C, a standard deduction of ₹50,000, and ₹2 lakh for home loan interest under Section 24(b).

In the 2024 Budget, Sitharaman raised the standard deduction for salaried individuals from ₹50,000 to ₹75,000, translating into potential annual savings of up to ₹17,500. The coming budget is expected to build on these reforms to relieve the financial strain on the salaried class.

With 72% of taxpayers reportedly favoring the new tax regime, these proposed changes aim to simplify compliance while promoting broader economic engagement.