As the Budget 2025 approaches, speculation has arisen around potential changes in the income tax structure. Finance Minister Nirmala Sitharaman may offer significant changes, particularly regarding the National Pension System (NPS) deductions. These deductions are currently available under the old tax regime, but the government could include them in the new tax regime as well.
New Tax Regime and NPS Deduction
The new tax regime, introduced in recent years, has garnered attention for offering lower income tax rates, though it doesn't provide the same exemptions and deductions as the old tax regime. As part of efforts to make the new tax regime more appealing, the government is considering incorporating NPS deductions into this system.
Currently, taxpayers who opt for the new tax regime forgo deductions like those for NPS contributions. However, with Budget 2025 on the horizon, Nirmala Sitharaman is expected to address this issue by extending the NPS deduction under the new tax regime. This change would provide a much-needed incentive for taxpayers to switch to the new regime.
Budget 2025: Key Changes in Income Tax
Apart from the NPS deduction, the Budget 2025 may also see an increase in the standard deduction limit under the new tax regime. From the existing ₹75,000, it could rise to ₹1 lakh, giving taxpayers additional relief. Reports suggest that the government may also reduce income tax rates for individuals earning up to ₹15 lakh annually, further boosting the new tax regime’s appeal.
How New Tax Regime in Budget 2025 Could Benefit You
The Budget 2024-25 is expected to introduce several steps to enhance the new tax regime’s attractiveness. These may include a rise in the standard deduction limit and revised tax slabs that could benefit salaried individuals. The new tax regime, which is now the default system, has gained favor among many taxpayers due to its simplified process and reduced rates. However, some still prefer the old regime for the variety of exemptions and deductions it offers.