The middle class is closely monitoring possible tax breaks and financial gains as Finance Minister Smt. Nirmala Sitharaman prepares to unveil the Union Budget 2025 on February 1. Many people are hoping for higher deductions, relief from essential costs, and an increase in the income tax exemption limit due to rising inflation and household expenses. Will the budget, however, live up to these expectations.
Expectations of the Middle Class: Emphasis on Tax Relief
In light of growing household expenses and inflation, the middle class is anxiously awaiting the Union Budget 2025 in the hopes of receiving much-needed tax relief. The government significantly altered the new tax regime in the previous budget by raising the Section 87A rebate to ₹7 lakh, which essentially made incomes up to this amount tax-free. In order to bring the new regime into line with the previous tax structure, a standard deduction of ₹50,000 was also implemented. But under the previous administration, the basic exemption limit stayed at ₹2.5 lakh, which left many taxpayers looking for additional relief. Deductions like Section 80C (₹1.5 lakh for investments in PF, ELSS, insurance, etc.), Section 80D (medical insurance), and others were still available to those choosing the previous tax system and up to ₹2 lakh in deductions for home loan interest.
Many middle-class families still bear the brunt of growing expenses in spite of these policies. Taxpayers are anticipating a higher standard deduction, a higher income tax exemption limit, and improved benefits for savings, home loans, and medical costs as the next budget draws near. In addition, there is a growing demand for more incentives for retirement fund investments and reduced GST rates on necessities. It is still unclear if the government will provide this much-needed relief, but it is anticipated that Budget 2025 will include funding to lessen the burden on middle-class households.
Here’s a comparison table of the Old Tax Regime and the New Tax Regime for individual taxpayers in India for the financial year 2023-24 (Assessment Year 2024-25).
Income Tax Slabs Comparison (Old vs. New Tax Regime)
| Annual Income (₹) | Old Tax Regime (With Deductions & Exemptions) | New Tax Regime (Without Deductions & Exemptions) |
| Up to ₹2.5 lakh | No Tax | No Tax |
| ₹2.5 lakh – ₹5 lakh | 5% (Rebate under Section 87A available) | No Tax (Rebate under Section 87A up to ₹7 lakh) |
| ₹5 lakh – ₹7.5 lakh | 5% | 10% |
| ₹7.5 lakh – ₹10 lakh | 15% | 15% |
| ₹10 lakh – ₹12.5 lakh | 20% | 20% |
| ₹12.5 lakh – ₹15 lakh | 25% | 25% |
| Above ₹15 lakh | 30% | 30% |
Key Differences Between Old & New Tax Regimes
| Aspect | Old Tax Regime | New Tax Regime |
| Deductions & Exemptions | Available (e.g., 80C, 80D, HRA, LTA, etc.) | Not available (most deductions removed) |
| Standard Deduction | ₹50,000 | ₹50,000 (Introduced in Budget 2023) |
| Section 80C (₹1.5 lakh deduction) | Available | Not available |
| Section 80D (Health Insurance) | Available | Not available |
| Rebate under Section 87A | Up to ₹5 lakh taxable income | Up to ₹7 lakh taxable income |
| Which is Better? | Beneficial if claiming deductions & exemptions | Simpler structure, may be beneficial for those not claiming deductions |
Increasing Expenses and the Need for Financial Assistance
In addition to taxes, the middle class faces challenges from growing fuel costs, high health care costs, and high educational costs. The following are in high demand:
- Reduced GST rates on necessities
- Higher home loan interest deduction limits (currently ₹2 lakh under Section 24(b))
- Higher benefits for retirement and savings plan investments.
- Tax breaks on medical costs and insurance premiums
Financial stability for middle-class households could be greatly enhanced by a relief package that tackles these issues.
The Government’s Dilemma: Fiscal Responsibilities vs Growth
Despite the high expectations, the administration must perform a difficult balancing act. Offering tax breaks and financial incentives may result in lower revenue collection, which would make controlling budgetary deficits more difficult. At the same time, encouraging investment and consumption is essential for economic expansion.
According to experts, the government might prioritize the following:
- Increasing social security benefits for the lower middle class.
- Creating jobs through incentives for startups and enterprises.
- Investing in infrastructure to boost economic activity and employment.
As of now, no significant tax reforms or relief initiatives have received formal confirmation. To combat inflation and increase discretionary income, the government may, nevertheless, implement certain benefits. To find out if the budget meets their expectations or if their hopes are dashed, for this we will have to wait until February 1.
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