Can Budget 2025 deliver financial relief? Middle-Class seek higher deduction, lower tax burdens amid economic strain

New Delhi: The middle class in India, a vital segment of the economy, has been vocal about the urgent need for increased income tax relief, higher rebates, and adjustments to tax slabs. As inflation continues to rise and the cost of living escalates, expectations from Finance Minister Nirmala Sitharaman's Budget 2025 are particularly focused on income tax benefits. This demographic is grappling with mounting financial pressures that threaten their disposable income.Current Financial LandscapeDespite record tax collections, the middle class faces significant challenges, including:

• High Inflation: The soaring prices of food, fuel, and essential goods are squeezing household budgets.
• Rising Home Loan Interest Rates: Increased rates have made housing less affordable for many.
• Stagnant Wage Growth: Limited increases in wages have not kept pace with the rising costs of living.
• Increased GST Rates: Higher Goods and Services Tax (GST) on various goods and services has further impacted consumption.

Given these challenges, taxpayers are looking for measures that can alleviate their economic burdens.Key Expectations from Budget 2025

1. Increase in Basic Exemption Limit
   Currently set at ₹3 lakh under the new tax regime and ₹2.5 lakh under the old regime, there is speculation that Budget 2025 may raise this limit to ₹5 lakh. Such an increase would benefit both salaried and self-employed individuals by reducing their taxable income.
2. Tax Slab Adjustments
   The last change in tax slabs occurred during Budget 2023, which raised the rebate limit under Section 87A to ₹7 lakh. However, since the tax slabs have remained largely unchanged since 2014, taxpayers are advocating for lower rates for middle-income groups. Proposed changes include reducing the tax rate from 15% to 10% for the ₹9-12 lakh bracket and from 20% to 15% for the ₹12-15 lakh range.
3. Higher Tax Rebate Under Section 87A
   Currently allowing tax-free income up to ₹7 lakh, there are expectations that this limit will be increased to between ₹8-10 lakh to ensure zero tax liability for a broader section of taxpayers.
4. Increased Standard Deduction for Salaried Employees
   With the current deduction set at ₹50,000, an increase to ₹75,000 or even ₹1 lakh is anticipated to help adjust for inflation and rising living costs.

Support for Homebuyers and Housing SectorThe housing sector is crucial for economic stability, with many middle-class families relying on home loans. Taxpayers expect increased deductions on home loan interest and principal repayments:

1. Higher Deduction on Home Loan Interest (Section 24b)
   The current deduction limit of ₹2 lakh may be raised to between ₹3-5 lakh to aid homebuyers facing rising property prices.
2. Additional Benefits for First-Time Home Buyers
   The previous deduction of ₹1.5 lakh under Section 80EEA expired in FY 2023; taxpayers hope it will be reintroduced to enhance housing affordability.

Tax Relief Through Savings and InvestmentsTaxpayers often depend on investments in ELSS, PPF, NPS, and insurance for deductions. Expanding these benefits could promote financial security:

1. Increase in Section 80C Deduction Limit
   Currently capped at ₹1.5 lakh, an increase to ₹2.5 lakh would allow greater tax-free savings.
2. Enhanced NPS Benefits
   The additional deduction limit under Section 80CCD(1B) may rise from ₹50,000 to ₹1 lakh to encourage retirement savings.

Healthcare and Medical Relief in Budget 2025With medical expenses surging post-COVID-19, taxpayers are seeking higher deductions on medical insurance premiums:

• Section 80D Deductions: Current limits may be raised from ₹25,000 (self & family) to ₹50,000 and from ₹50,000 (senior citizens) to ₹75,000.
• Section 80DD Deductions: Expected increases from ₹75,000 to ₹1 lakh for disabled dependents.

GST Rationalization and Its ImpactBeyond direct tax reliefs, there is a strong demand for GST rationalization as high rates have escalated daily essential costs:

• Anticipated reductions in GST rates on essential items like packaged food and healthcare.
• A potential decrease in GST on automobiles and electronics from 28% to 18%.

Anticipated Changes for Government EmployeesWith the implementation of the 8th Pay Commission expected by January 2026, central government employees are hopeful for salary revisions:

1. Fitment Factor Increase: An anticipated rise from the current factor of 2.57 to around 2.86 could significantly boost minimum salaries.
2. Higher HRA & Transport Allowance: Adjustments based on inflation and real estate prices are expected.

As Finance Minister Nirmala Sitharaman prepares her presentation of Budget 2025, hopes run high within the middle class for meaningful tax relief and economic measures that will enhance disposable income.