As Finance Minister Nirmala Sitharaman prepares to announce Budget 2025, various predicted income tax adjustments may affect salaried workers. The 2019 budget may include reforms to help taxpayers, particularly if inflation rises. Mumbai-based tax and investment expert Balwant Jain identified five key tax reforms that salaried individuals may expect in the Modi 3.0 government's second budget.

5 Income Tax Changes to Expect in Budget 2025

1) Income tax slab rate

The government may promote the new tax regime by providing additional perks to make it more appealing to taxpayers.

There is concern that the government may adjust the income tax slab under the new tax system. "To make the regime more progressive and more in line with the state of the economy, it is suggested that the 30% tax rate be applied to income levels above ₹20 lakh, keeping in view the inflation" , according to tax specialist Balwant Jain.

2) Senior citizens to have special tax slabs under the new administration

The new tax slabs are the same for all taxpayers, regardless of age. "However, the government should implement a diversified tax structure under the new regime, notably for senior persons. For example, senior folks (aged 60 and up) could be given a higher exemption ceiling or reduced tax rates, making the tax system more favorable to them," stated Balwant Jain.

Previously, the baseline exemption limit for elderly citizens was ₹3 lakh, while super senior citizens had a ceiling of ₹5 lakh.

3) Standard Deduction

There is also talk about raising the standard deduction for salaried individuals. Salaried employees and pensioners receive a standard deduction of Rs. 50,000 under the old tax regime and ₹75,000 under the new tax regime on their taxable income, regardless of their income.

Balwant Jain suggests linking the standard deduction to a specific fraction of an individual's income, with a maximum cap of ₹1 lakh, independent of the tax system used. This would allow for salary-based modifications to the standard deduction, giving higher-income people additional support.

4) Import duty for gold

The government may raise the import duty on gold in order to resolve trade deficit issues and reduce excessive imports.

"Domestically, there are concerns that the Indian government may raise import duties on gold in the next Union Budget in order to reduce gold imports and address the trade deficit." Sugandha Sachdeva, Founder of SS WealthStreet, stated that such a move could result in price modifications as well as divergence from worldwide markets.

India now charges a 6% import tax on gold. The import tariff on gold was reduced from 15% to 6% in the Union Budget 2024. This cut was enacted on July 24, 2024.

5) Section 80 C Deduction

Tax experts are discussing the Section 80C deduction ceiling, which has seen minor growth over the years. In 2003, the highest deduction allowed under Section 80C was ₹1 lakh. In 2014, the cap was extended to ₹1.5 lakh to provide respite, however this has not been enough to keep up with inflation.

"With the rising cost of living and the increasing financial burden on taxpayers, the Section 80C limit should be raised further, and it could be increased to ₹3.5 lakh to better align with the current economic conditions," Jain added.