Union Budeget 2025 Expectations: Revise Rates, Changes in Old Regime & More

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Finance Minister Nirmala Sitharaman is set to present the Union Budget 2025 on February 1, 2025. With a focus on balancing fiscal responsibility and economic growth, expectations are high for income tax relief, sectoral incentives, and enhanced financial support mechanisms. Taxpayers, the middle class, and industry stakeholders are eagerly anticipating reforms to stimulate consumption, ease financial burdens, and foster innovation. Here, through this article, you will get an idea of what to expect from the Union Budget 2025.

Union Budeget 2025

1. Income Tax Relief for Salaried Individuals

The salaried class is expecting revisions in tax slabs and deductions. Since the introduction of the New Tax Regime in 2020, the government has encouraged a transition by offering lower tax rates with minimal exemptions. However, many taxpayers continue to prefer the Old Tax Regime due to its deductions under Sections 80C, 80D, and other benefits.

Expected Tax Reforms

  • Higher 80C Deduction Limit: The ₹1.5 lakh limit under Section 80C, covering investments like the Public Provident Fund (PPF), National Savings Certificate (NSC), and ELSS, has remained unchanged since FY 2014-15. Experts suggest raising this limit to ₹3 lakh to better align with modern financial needs.
  • Increased HRA Exemption for Growing Cities: The current House Rent Allowance (HRA) cap is 50% of the basic salary for metro cities (Delhi, Mumbai, Chennai, Kolkata) and 40% for others. Given the economic prominence of cities like Bangalore, Pune, and Hyderabad, a higher HRA exemption for these hubs is recommended reform.

Tax Regime Comparisons

Taxpayer PreferencesOld Tax RegimeNew Tax Regime
Key FeaturesDeductions (80C, 80D, HRA)Lower tax rates, fewer exemptions
Section 80C DeductionUp to ₹1.5 lakhNot applicable
PopularityPreferred for investment-linked savingsIncreasing adoption (72% by FY 2023-24)

In last year’s budget, FM Sitharaman made the New Tax Regime the default system while retaining the old regime as an option. Taxpayers now await adjustments in both regimes to maximize tax savings and enhance disposable income.

2. Support for Savings and Fixed Deposits

The current Section 80TTA allows a deduction on interest earned from savings accounts up to ₹10,000. Taxpayers expect this provision to be expanded to include term deposits and raised to ₹50,000, similar to benefits under Section 80TTB for senior citizens. This reform would encourage savings, particularly in a high-inflation environment.

3. Education Sector Reforms

Higher Education Loans – Expanded Benefits

Section 80E offers a deduction on education loan interest for up to eight years. However, with rising education costs and longer repayment periods, experts recommend:

  • Extending the deduction period to 10 or 12 years
  • Including the principal amount under Section 80E deductions

These changes would reduce the financial strain on families and make higher education loans more affordable.

New Financing Programs for Students

The government could introduce nationwide work-study programs and alternative financing models to reduce dependency on loans. Expanding tax exemptions for education-related expenses would further promote accessible higher education.

4. Housing Sector – Affordable Homeownership Initiatives

The rising cost of real estate and construction materials has intensified the demand for higher tax benefits on home loans. Proposed reforms include:

  • Increasing the principal repayment limit under Section 80C (currently capped at ₹1.5 lakh).
  • Raising the ₹2 lakh rebate on home loan interest under Section 24(b).
  • Reducing GST on construction materials, especially cement (currently taxed at 28%).

Additionally, promoting green housing projects with tax incentives and subsidies would accelerate sustainable development and eco-friendly construction.

5. FinTech and Start-Up Sector Incentives

India’s fintech and start-up ecosystem is among the world’s largest, contributing significantly to GDP growth. Stakeholders are advocating for:

  • Priority Sector Lending (PSL) Status for Fintechs:
    PSL status would enable fintechs to access more credit at lower rates and invest in technology to drive financial inclusion.
  • Angel Tax Exemptions and Capital Gains Relief:
    Reducing capital gains tax for venture capitalists and private equity investors would attract more investment into healthcare, financial services, and technology.
  • Regulatory Sandboxes for Emerging Tech:
    Expanding sandbox capabilities would speed up approval processes for new financial products, fostering a dynamic fintech ecosystem.

6. Semiconductor and Manufacturing Industry

With the global push for semiconductor self-reliance, India allocated ₹6,903 crore to this sector in the 2024 budget, a 52% increase over the previous year. Expectations for 2025 include:

  • Increased investment in semiconductor fabs and display manufacturing units
  • Tax exemptions on critical minerals like lithium, copper, and rare earth elements
  • Incentives for public-private partnerships in tech infrastructure

Such measures would reduce import dependency and position India as a global semiconductor hub.

7. National Pension System (NPS) Reforms

NPS reforms are widely anticipated to enhance retirement planning. Financial experts recommend:

  • Simplifying withdrawal rules
  • Increasing tax exemptions for contributions
  • Providing uniform tax treatment across investment vehicles

A more attractive NPS would encourage long-term retirement savings, addressing India’s retirement preparedness challenge.

8. Healthcare – CGHS Services Overhaul

Central Government Health Scheme (CGHS) beneficiaries have called for better medical facilities and streamlined services. The NC JCM has urged the government to:

  • Revise CGHS rates to match current market conditions
  • Address doctor shortages and improve patient experience
  • Expand AYUSH wellness centers to promote traditional medicine

These measures would enhance healthcare access for government employees and pensioners.

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