Every Budget season, the most frequently asked question remains the same: does it have anything for the wage bracket? With Finance Minister Nirmala Sitharaman set to present the Budget 2025-26 on February 1, the salaried class is once again watching to see if the government has any plans to reduce their financial burden.
Economists have suggested that this time the government would offer a higher tax exemption limit and a higher standard deduction under the new tax regime, which would benefit many taxpayers. In the last budget, the standard deduction was increased from Rs 50,000 to Rs 75,000, while the exemption limit under the new regime is Rs 3 lakh.
The economists also hinted at tax incentives for electric vehicles, which would boost the housing sector and facilitate the buying and selling of real estate by non-residential Indians (NRIs).
Deepika Mathur, director of Deloitte India, said if the government plans to provide any relief at all to the salaried class, it can only benefit those under the new regime.
“I actually don't expect any changes to the old tax regime. However, I do expect a further increase in the standard deduction in the new tax regime. Whatever changes are going to happen, whether it's an increase in the standard deduction or a change in the tax rate or I expect that will happen in the new tax regime, if at all, or an increase in the basic exemption limit ,” she told NDTV.
The new regime simplifies tax reporting and offers lower tax rates, but unlike the old regime, it does not offer deductions. On the other hand, the old regime offers a whole range of deductions, but also higher rates.
As inflation eats away at the value of money, consumers are also interested in efforts that would increase the purchasing power of the middle class.
Sanchita Mukherji, Senior Business Economist and Managing Partner at 'Talk The Walk', pointed out that salaried workers are disproportionately burdened.
“In India, middle-class wage-earning individuals pay disproportionately high personal income taxes because salaries are much more easily taxed than any other type of income. The complaint is that the middle class, who first pay taxes on income, are being taxed again while spending after-tax income and capital gains from the sale of stocks and real estate,” she said.
Another key challenge that Ms. Mathur said needs to be addressed in this year's budget is facilitating tax payments from foreign bank accounts.
“There are a lot of people who live abroad, they are foreign nationals, Indians or non-resident Indians, who may have worked in the past or are abroad and have investment income in India. The payments for taxes can only be made from a Sometimes that is a challenge, so tax payments have to be facilitated from foreign bank accounts because the government has an interest in ensuring that the tax is paid without much compliance issues. Therefore, it should not be relevant where the payment comes from is an Indian bank account or a foreign bank account,” she said.
While these are proposed measures, the focus is on whether February 1 will completely change India's tax landscape or whether the middle class will continue to yearn for more change.