Union Budget 2025: Potential Tax Relief for Incomes Up to ₹15 Lakh
New Delhi, January 25: The much-anticipated Union Budget 2025 is set to be presented on February 1 by Finance Minister Nirmala Sitharaman. Speculations are rife about substantial tax relief for the general public, with reports suggesting significant modifications to the existing tax structure. A key highlight could be tax exemptions for individuals earning up to ₹15 lakh annually, potentially increasing disposable income and boosting consumer spending.
Current Tax Brackets Under the New Regime
The new tax regime, introduced in the financial year 2020-21, has garnered widespread acceptance among taxpayers for its simplicity. The current structure is as follows:
- Income up to ₹3 lakh: Exempt from tax.
- ₹3 lakh to ₹6 lakh: 5% tax.
- ₹6 lakh to ₹9 lakh: 10% tax.
- ₹9 lakh to ₹12 lakh: 15% tax.
- ₹12 lakh to ₹15 lakh: 20% tax.
- Above ₹15 lakh: 30% tax.
Under this framework, the standard deduction of ₹75,000 effectively means that individuals earning up to ₹7.75 lakh owe no taxes. Additionally, taxpayers with incomes up to ₹7 lakh are exempt under the rebate provisions.
Proposed Changes to Tax Brackets
According to insider reports, the basic exemption limit could rise from ₹3 lakh to ₹4 lakh, offering relief to low-income earners. Further adjustments to the tax brackets are under consideration, which might include:
- Expanding the 5% tax bracket to include incomes between ₹4 lakh and ₹7 lakh, up from the current ₹3 lakh-₹6 lakh range.
- Broadening the structure to benefit individuals earning up to ₹14 lakh, thereby making the regime more advantageous.
Why a Revision is Expected
The government’s move to restructure tax slabs appears to be driven by the need to address the financial stress faced by middle-income earners, particularly those in urban areas. Rising inflation has eroded purchasing power, especially for individuals earning between ₹13 lakh and ₹14 lakh annually.
The anticipated adjustments aim to:
- Ease financial pressure on urban taxpayers.
- Encourage consumption, fueling economic growth.
- Provide relief to a segment critical to the country’s economic stability.
Experts estimate that raising the exemption threshold and expanding tax brackets could significantly reduce the tax burden on millions, spurring spending in key sectors.
Buoyant Tax Collections Support Changes
Personal income tax collections have seen a remarkable 25% growth, reaching ₹7.41 lakh crore between April and November 2025. This consistent performance has positioned the government to consider tax relief measures.
Key Highlights:
- Personal tax contributions have surpassed expectations, bolstering government revenues.
- Unlike corporate tax collections, personal tax has emerged as a stable and growing source of income for the exchequer.
This financial cushion strengthens the possibility of tax exemptions and adjustments, ensuring a balance between fiscal prudence and taxpayer relief.
Economic Implications of Tax Relief
Potential tax exemptions for incomes up to ₹15 lakh could:
- Increase disposable income: Encouraging spending on goods and services.
- Boost economic activity: Especially in urban markets, driving demand across sectors.
- Improve taxpayer sentiment: Enhancing compliance and participation in the formal economy.
