Rising Demands for Tax Relief in Union Budget 2025-26 Amid Capital Gains Hike

The anticipation for income tax relief in the Union Budget 2025-26 continues to intensify as Finance Minister Nirmala Sitharaman gears up to present the budget in February 2025.

Both individuals and industry bodies are urging for tax reductions to ease financial burdens.

Taxation Changes in the Previous Budget

In the last Union Budget, Finance Minister Sitharaman increased capital gains tax, raising both short-term and long-term capital gains tax rates.

Additionally, revisions to income tax slabs under the new tax regime were announced. As a result, taxpayers are now demanding relief in tax rates to offset these changes.

Expectations for the 2025-26 Budget

A Reuters report recently revealed that the government may announce personal income tax reductions in the upcoming budget. If implemented, this move would primarily benefit urban taxpayers grappling with high living costs.

FM Sitharaman’s Statements on Tax Relief

During an earlier interview with Times Now, Sitharaman highlighted her efforts to reduce the tax burden on salaried individuals.

She noted, “To make a difference to the salaried people, I made sure that the standard deduction would go up from Rs 50,000 to Rs 75,000.” She further acknowledged limitations in taxation while expressing her willingness to do more.

The Confederation of Indian Industries (CII) has suggested reducing personal income tax rates to boost disposable income and consumption.

CII Chairman Sanjiv Puri emphasized the importance of providing relief on marginal income tax rates for individuals earning up to ₹20 lakh annually.

Industry Proposals and Economic Challenges

Industry representatives have also recommended reducing excise duties on fuel to increase disposable income.

Addressing broader economic concerns, they highlighted issues like global commodity dumping by China and climate-related risks to food security and inflation.

Representatives from organizations like FICCI, PHDCCI, and Assocham participated in pre-budget meetings, stressing the need for reforms to support the middle class and bolster economic resilience.

FICCI Vice President Vijay Sankar noted challenges from global economic trends, including slowdowns in neighboring countries.

Recent Tax Relief Measures

The Union Budget 2024 introduced enhancements to the New Tax Regime, such as widening income tax slabs and raising the standard deduction from ₹50,000 to ₹75,000.

This regime offers lower tax rates but requires taxpayers to forgo exemptions and deductions available under the Old Tax Regime.

Under the new regime, individual taxpayers can claim deductions of ₹50,000, while family pensioners may deduct up to ₹15,000. Salaried individuals earning ₹15.5 lakh or more received tax benefits of ₹52,500.

Despite these changes, the Old Tax Regime remains unchanged, allowing taxpayers to utilize deductions for loan repayments, insurance premiums, and educational expenses.

Capital Gains Tax Revisions

In Budget 2024, the government increased capital gains tax rates. Short-term capital gains on equity-related investments rose from 15% to 20%, while the tax-free limit for long-term capital gains increased from ₹1 lakh to ₹1.25 lakh.

However, the removal of indexation benefits may diminish the advantage for many taxpayers.

Additionally, mutual funds with over 65% of assets in debt instruments are now classified as debt funds, aligning their taxation with that of debt instruments.

The Finance Bill 2024 also provided relief for homebuyers who purchased properties before July 23, 2024, allowing them to choose between two tax rates for long-term capital gains.