Kumar Bahukhandi
Finance Minister Nirmala Sitharaman
Income Tax: Taxpayers now have the option to choose from two different tax systems. The first is the legacy plan, which allows exemptions on housing rent and insurance, giving taxpayers some relief in these areas.
New Delhi : The government is reportedly considering giving a big relief to the middle class. It is expected that income tax can be cut in Budget 2025. This will benefit millions of taxpayers and increase their take home income. The report says that the government is considering cutting income tax for individuals with income up to Rs 15 lakh per annum.
According to a Reuters report, which quoted government sources, the upcoming Union Budget 2025-26 can provide relief to the middle class and boost consumption. According to the report, if taxpayers choose the 2020 tax system i.e. the new tax system, in which exemptions like house rent have been removed, then it will benefit millions of people.
Under the 2020 tax system, an annual income of Rs 3 lakh to Rs 15 lakh is taxed between 5-20 percent. While individuals with more income than this are taxed at 30 percent. Now let’s understand this in a little more detail.
As per the new tax system, 0% tax is levied on income up to Rs 3 lakh.
5% tax is levied on income of Rs 3-7 lakh.
10% tax is levied on income of Rs 7-10 lakh.
15% tax is levied on income of Rs 10-12 lakh.
20% tax is levied on income of Rs 12-15 lakh.
30% tax is levied on income of Rs 15 lakh and above
Taxpayers have the right to choose between two options
Taxpayers now have the option to choose between two different tax systems. The first is the legacy plan, which allows exemptions on housing rent and insurance, giving taxpayers some relief in these areas.
The second option, which was introduced in 2020, has slightly lower tax rates but no major exemptions have been given. Reducing taxes may lead more people to choose the new system, which is less complex .
Why might a tax cut be made?
According to the report, the government has not yet decided on the size of any tax cuts. The decision will be taken around February 1. India gets most of its tax income from people earning at least Rs 10 lakh, which is taxed at 30 percent. The report says that the government is under political pressure from the middle class, which is burdened by high taxes. This discontent has been exacerbated by salary increases that are not keeping pace with inflation, putting even more pressure on household budgets.
