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As the Union Budget 2025 nears, taxpayers across India eagerly await announcements that could ease their financial burdens. Income tax reforms are at the forefront of these expectations, with calls for more progressive and inclusive measures to support individuals and families amid rising living costs and evolving economic dynamics.

Key Income Tax Expectations

1. Revision of Tax Slabs
The current tax slabs under the old regime have remained unchanged for several years. Taxpayers are hoping for an increase in the basic exemption limit from ?2.5 lakh to ?5 lakh, aligning it with the rebate available under Section 87A in the new tax regime. This move would benefit a significant portion of middle-income earners.

2. Enhanced Standard Deduction
Salaried individuals and pensioners currently enjoy a standard deduction of ?50,000. Expectations are high for a hike in this deduction to ?1 lakh, providing much-needed relief for fixed-income groups.

3. Higher Limits for Tax-Saving Investments
Under Section 80C, the deduction limit of ?1.5 lakh has remained static despite inflation and increasing financial commitments. Taxpayers are calling for this cap to be raised to ?2.5 lakh to encourage savings and investments in instruments like Public Provident Fund (PPF), National Savings Certificate (NSC), and Equity-Linked Savings Schemes (ELSS).

4. Increase in Home Loan Interest Deduction
The current deduction of ?2 lakh under Section 24(b) on home loan interest for self-occupied properties could see a much-needed revision to ?3 lakh. This adjustment would stimulate the real estate sector and help middle-class families achieve their dream of owning a home.

5. Deductions for Healthcare Costs
Amid rising healthcare expenses, there is a demand for enhanced deductions under Section 80D for health insurance premiums and medical expenses for senior citizens. Additionally, taxpayers expect specific relief for expenses incurred on COVID-19-related treatments.

6. Support for the New Tax Regime
The new tax regime, introduced as a simpler alternative, has yet to gain traction among taxpayers. A potential solution could include additional deductions or exemptions, making it more attractive while ensuring it caters to diverse income groups.

7. Streamlining Tax Compliance
Taxpayers expect further simplification of filing processes, including pre-filled returns with improved accuracy and clarity. Reducing compliance burdens will encourage voluntary tax compliance and enhance the overall taxpayer experience.

Impact on the Economy

Reforms in income tax will not only benefit individual taxpayers but also boost disposable incomes, leading to higher consumption. This, in turn, could catalyze economic growth, especially in sectors like retail, housing, and healthcare.

Conclusion

The Union Budget 2025 is an opportunity for the government to address the aspirations of millions of taxpayers. By implementing targeted income tax reforms, the Finance Minister can ensure financial relief for the common man while supporting India's broader economic goals.