Budget 2025: From Tax Slabs To Deductions, How The New Income Tax Regime Can Be Revised

The New Tax regime was launched in 2021 and tries to simplify the tax structure for the public. However, experts believe that more changes can be introduced to promote equity across income groups.

Written By : ABP News Bureau | Updated at : 26 Jan 2025 05:26 PM (IST)

The new Direct Tax Code is scheduled to be released in the Union Budget 2025 and there is expectation that these reforms can address the gaps in the tax framework.

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The existing threshold for 30 per cent income tax has been unchanged since 2020, however, the Cost Inflation index has climbed 21 per cent during the same period. ABP Live AI

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Hiking this limit for the 30 per cent tax slab from Rs 15 lakh to Rs 18 lakh would help middle-income individuals avoid being pushed into the highest tax bracket. ABP Live AI

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However, simply raising the tax-free income limits also puts the tax burden disproportionately on the higher-income groups. Therefore, a detailed adjustment is needed across tax brackets at all income levels. ABP Live AI

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In addition to tax slabs, deductions are also needed in the new tax regime. A lack of this has discouraged long-term savings and left individuals more vulnerable to economic shocks. ABP Live AI

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In order to ensure equity across income levels, a flat deduction should be levied at Rs 15 lakh. This limit will help middle and upper-middle-income households and also prevent large deductions for high-income individuals. ABP Live AI

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These changes will not only boost financial stability but also help increase the amount of disposable income and discipline in households. ABP Live AI