Budget 2025: Are Deductions Like HRA And 80C Available Under New Tax Regime? Check Here
Taxpayers are keenly awaiting possible reductions in tax rates and increased exemption limits, amid ongoing high inflation and shifting consumption trends
Union Budget 2025: Finance Minister Nirmala Sitharaman is all set to present the Union Budget on February 1, 2025, which will be the second budget for the Modi 3.0 government. Taxpayers are keenly awaiting possible reductions in tax rates and increased exemption limits, amid ongoing high inflation and shifting consumption trends.
With the rising cost of living people are looking towards the New Tax Regime introduced by the current government. Experts are calling for the inclusion of HRA, enhancements to Section 80C tax deductions, and a standard deduction of Rs 1 lakh in the New Tax Regime in Budget 2025.
Standard Deduction
Introduced in the Union Budget 2020, the New Tax Regime was designed as an alternative to simplify the tax system. It offers lower tax rates but eliminates certain exemptions and deductions from the old regime, such as the standard deduction and home rent allowance (HRA).
Under both the Old and New Tax Regimes, salaried employees are allowed a Standard Deduction of Rs 50,000, regardless of their gross salary. This benefit also extends to pensioners, irrespective of the tax regime they choose.
In Budget 2024, Finance Minister Sitharaman raised the standard deduction for salaried individuals to Rs 75,000 under the New Tax Regime.
In FY 2005-06, the standard deduction was removed, but it was reintroduced in the 2018 Budget by the late Hon'ble Finance Minister Arun Jaitley. During his budget speech, he announced a standard deduction of Rs 40,000 for salaried taxpayers, replacing the earlier exemptions for transport allowance and medical expenses.
HRA Exemptions
Taxpayers are requesting the government to include HRA exemptions in the new tax regime. At present, this benefit is only available under the old system, providing potential tax savings. The exemption amount is calculated as the lowest of the following: actual HRA received; 50 per cent of basic salary (40 per cent for non-metro residents) and rent paid minus 10 per cent of basic salary
Experts suggest that incorporating this exemption into the new tax regime would make it more practical for taxpayers, especially those dealing with significant housing costs.
Section 80C
Section 80C of the Income Tax Act, 1961, is a popular avenue for individuals seeking to reduce their taxable income. By investing in eligible financial instruments or making qualified expenses, taxpayers can claim a maximum deduction of Rs 1.5 lakh. This section includes a variety of savings and investment options, such as contributions to LIC, PPF, and other government-approved schemes.
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