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Budget 2025: Will 25% tax rate and fresh deductions be announced under new regime?

Sitanirmla

The government introduced a new tax regime in 2020 to simplify the tax system. The regime included concessional tax rates and the removal of certain deductions. Nearly 72% of taxpayers opted for the new regime when filing fiscal year 2023-24 income tax returns.

Below are some tax proposals for the new regime that may be in Budget 2025.

Taxpayers could witness a raise in the basic exemption limit from Rs 3,00,000 to Rs 3,50,000, which would offer much-needed relief to individuals by increasing their disposable income and raising consumption levels.

Under the new tax regime, employer contributions to NPS are tax-exempt. However, individual contributions to NPS are exempt only under the new tax regime, which the government may now extend.

Currently, rebate under Section 87A is applicable for income levels up to Rs 7 lakh. The government might extend this to Rs 8 lakh.

In addition to the existing tax slabs, the government might announce a new tax slab with a 25% tax rate for income above Rs 15,00,000 to Rs 18,00,000, while income above Rs 18,00,000 may be levied with a 30% tax rate.

Meanwhile, as 28% of taxpayers continue to opt for the old tax regime, the government may also announce a few changes to it.

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