New Income Tax Bill 2025: All You Need to Know!
Key Tax Reforms to Watch in Budget 2025


Last Updated: 31st January 2025 - 09:59 am
As the Union Budget 2025 approaches, taxpayers and businesses eagerly anticipate potential reforms that could ease financial burdens and promote economic growth. With rising inflation and increasing living costs, the government is expected to introduce measures aimed at benefiting middle-class individuals, salaried employees, and businesses. Here’s a look at the key tax reforms that could shape the upcoming budget.

Expected Tax Relief for Middle-Class Taxpayers
One of the major expectations from Budget 2025 is tax relief for individuals earning up to Rs. 15 lakhs. There have been speculations that the government is likely to implement certain changes that will provide financial relief, including:
Increase in Basic Exemption Limit: The threshold for tax exemption is expected to rise from Rs. 3,00,000 to Rs. 5,00,000, easing the tax burden on lower-income taxpayers. Experts have also suggested increasing this limit further for senior citizens.
Introduction of the Direct Tax Code: This long-awaited reform aims to simplify tax filing and compliance, making it more efficient and transparent for all taxpayers.
Increase in Standard Deduction: A higher standard deduction could reduce taxable income for salaried individuals, enhancing disposable income.
New Tax Slabs: A 25% tax slab for incomes between Rs. 15 lakhs and Rs. 20 lakhs is under consideration, along with an increase in the 30% slab threshold from Rs. 15 lakhs to Rs. 20 lakhs. These adjustments aim to offer greater relief to middle-class taxpayers.
Homeownership and Section 80D Reforms
Experts suggest that the government should promote homeownership by extending tax benefits under the new tax regime. Some anticipated reforms include:
Higher Deduction Limit for Home Loan Interest: The deduction under Section 24(b) for home loan interest is expected to increase from Rs. 2 lakhs to Rs. 3 lakhs. This change could encourage homeownership, boost the real estate sector, and stimulate economic growth.
Expansion of Section 80D: Currently available only under the old regime, the proposed change includes raising the tax deduction limit to Rs. 50,000 (Rs. 1,00,000 for senior citizens) and incorporating Section 80D into the new tax regime. Given rising healthcare costs, this move would promote health insurance adoption and financial security.
Increase in Section 80C Limit
The deduction limit under Section 80C has remained at Rs. 1.5 lakhs since 2014. It is expected that the government may raise this to Rs. 2 lakhs, encouraging greater savings and investments in Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), National Savings Certificate (NSC), and other tax-saving instruments. This will help taxpayers build long-term financial security while boosting investment in financial markets.
Taxation on Capital Gains
According to a Mint Article, a tax expert suggests that some proposed changes in the 2024 budget regarding capital gains tax need further review. Notably, the expert advocates for a consistent tax treatment for similar investments, such as aligning the taxation of Indian and international stocks, and applying uniform tax rates to different types of gold investments. Additionally, given the increase in short-term and long-term capital gains tax (from 15% to 20% and 10% to 12.5%, respectively), the expert recommends eliminating the Securities Transaction Tax (STT) on stock transactions to reduce the overall tax burden on investors. These reforms, if considered can make a huge difference for investors.
Start-ups and MSME Support
Start-ups and Micro, Small, and Medium Enterprises (MSMEs) are the backbone of India’s economy. The Union Budget 2025-26 is expected to introduce measures aimed at fostering their growth:
Simplified GST Structures: Easing compliance burdens and streamlining tax procedures for MSMEs.
Reduced Tax Rates: Offering lower tax rates to start-ups and small businesses to encourage entrepreneurship.
Targeted Subsidies: Providing financial support and incentives to boost innovation and sustainability in the sector.
Corporate Tax Reforms
Several corporate tax changes are anticipated to drive business growth and attract investments:
Extended Concessional Tax Rates for Manufacturing: The 15% concessional tax rate, currently available to new domestic manufacturing companies incorporated before March 31, 2024, is expected to be extended to firms starting production from April 1, 2024. This could encourage investment in India’s manufacturing sector.
Tax Benefits for Global Capability Centers (GCCs): India hosts over 1,700 GCCs, and this number is expected to grow. To support expansion and job creation, the government may offer the 15% tax rate to GCCs, enhancing India’s position as a global business hub.
Incentives for Research & Development (R&D)
The removal of the weighted average deduction on R&D expenses has reduced tax incentives for private investment in innovation. The government is likely to introduce new tax benefits, allowing deductions for specified R&D expenditures such as salaries, materials, and infrastructure investments. This will encourage businesses to invest in cutting-edge research, fostering technological advancements and industrial growth.
Conclusion
Budget 2025 is expected to bring significant tax reforms that will benefit individuals and businesses alike. By offering relief to middle-class taxpayers, promoting homeownership, enhancing corporate tax incentives, and supporting start-ups and MSMEs, the government aims to drive economic growth and financial stability. These changes will not only ease financial stress but also encourage investments and innovation, paving the way for a stronger economic future.
- Flat ₹20 Brokerage
- Next-gen Trading
- Advance Charting
- Actionable Ideas
Trending on 5paisa
Indian Stock Market Related Articles
Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing. For detailed disclaimer please Click here.