Union Budget 2025 to boost salaried taxpayers with increased standard deduction?

The Union Budget for 2025-2026, scheduled to be presented on February 1, is expected to bring relief to middle-class taxpayers through a series of reforms aimed at reducing their tax burden. The budget may introduce significant changes to the new tax regime, including increasing the basic exemption limit or revising the existing tax slabs to ease financial pressure on the salaried class.

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One of the anticipated measures is making annual income up to Rs 10 lakh tax-free, alongside the introduction of a new 25% tax slab for individuals earning between Rs 15 lakh and Rs 20 lakh. In addition, the standard deduction for salaried individuals is likely to rise from Rs 75,000 to Rs 1,00,000, further reducing their taxable income.

The budget may also focus on simplifying the rules surrounding the determination of residential status, potentially replacing the current three-tier system with just two categories: Resident and Non-Resident. Tax benefits are expected for entities registered in International Financial Services Centres (IFSC), including lower tax rates or the removal of Minimum Alternate Tax (MAT) and Alternate Minimum Tax (AMT) provisions.

Moreover, there could be provisions for an additional standard deduction for salaried individuals who avail of housing loans. The government may also look to expand the tax base, aiming for lower tax rates for current taxpayers while limiting certain exemptions for high-net-worth individuals.