In order to switch to the new system, the Center is thinking of eliminating all exemptions under the Old Tax Regime. This is based on an sbi Research research that was made public prior to Finance minister Nirmala Sitharaman's february 1, 2025, budget statement.
According to a business Today article, the proposal calls for expanding the medical insurance exemption under section 80D from Rs 25,000 to Rs 50,000 and the National Pension System (NPS) limit from Rs 50,000 to Rs 1 lakh.
On february 1, Finance minister Sitharaman will unveil the Union Budget for 2025. This coincides with a sharp slowdown in GDP growth in recent quarters. It is anticipated that the administration would give economic recovery top priority in its objectives.
Proposed Changes by sbi Research
Several tax-relieving solutions have been suggested by sbi Research for the next budget. These include expanding the medical insurance exemption from Rs 25,000 to Rs 50,000 and combining all exemptions under the new tax system, as well as extending the NPS ceiling from Rs 50,000 to Rs 1 lakh. Furthermore, they recommend keeping the top tax rate at 30% for income exceeding Rs 15 lakh while lowering it from 20% to 15% for those making Rs 10–15 lakh.
A flat 15% tax on bank deposits for all maturity periods is also suggested by the research. This money needs to be deducted from the highest income category and added to other wages. Additionally, they suggest increasing the tax exemption threshold for deposits into savings accounts to Rs 20,000.
According to Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser at sbi, "We estimate GoI can ensure better tax compliance and bolster consumption through enhancing disposable income by moving all and one under the New Tax regime," the research said.
Old Tax Regime Possibilities
As of yet, there have been no formal declarations on the repeal of the previous tax system. But there are still debates over its future. The new tax system, which was unveiled in the 2020 Union Budget, offers reduced rates without the exemptions and deductions that were previously accessible.
Some taxpayers still favor the previous system because of deductions like those under Sections 80C and 80D, even if its simplicity attracted many. According to vivek Jalan of Tax Connect Advisory services LLP, doing away with it entirely would make sense in terms of streamlining income tax brackets.
"Today, under the New Tax Regime, income tax has become much simpler," Jalan said. "With an exemption limit of Rs 7 lakhs, taxpayers pay zero tax at levels where they were previously taxed." When he presented this budget suggestion on february 1st of next year, he indicated that, as part of a thorough evaluation, making this the only choice would be advantageous overall.
According to a business Today article, the proposal calls for expanding the medical insurance exemption under section 80D from Rs 25,000 to Rs 50,000 and the National Pension System (NPS) limit from Rs 50,000 to Rs 1 lakh.
On february 1, Finance minister Sitharaman will unveil the Union Budget for 2025. This coincides with a sharp slowdown in GDP growth in recent quarters. It is anticipated that the administration would give economic recovery top priority in its objectives.
Proposed Changes by sbi Research
Several tax-relieving solutions have been suggested by sbi Research for the next budget. These include expanding the medical insurance exemption from Rs 25,000 to Rs 50,000 and combining all exemptions under the new tax system, as well as extending the NPS ceiling from Rs 50,000 to Rs 1 lakh. Furthermore, they recommend keeping the top tax rate at 30% for income exceeding Rs 15 lakh while lowering it from 20% to 15% for those making Rs 10–15 lakh.
A flat 15% tax on bank deposits for all maturity periods is also suggested by the research. This money needs to be deducted from the highest income category and added to other wages. Additionally, they suggest increasing the tax exemption threshold for deposits into savings accounts to Rs 20,000.
According to Dr. Soumya Kanti Ghosh, Group Chief Economic Adviser at sbi, "We estimate GoI can ensure better tax compliance and bolster consumption through enhancing disposable income by moving all and one under the New Tax regime," the research said.
Old Tax Regime Possibilities
As of yet, there have been no formal declarations on the repeal of the previous tax system. But there are still debates over its future. The new tax system, which was unveiled in the 2020 Union Budget, offers reduced rates without the exemptions and deductions that were previously accessible.
Some taxpayers still favor the previous system because of deductions like those under Sections 80C and 80D, even if its simplicity attracted many. According to vivek Jalan of Tax Connect Advisory services LLP, doing away with it entirely would make sense in terms of streamlining income tax brackets.
"Today, under the New Tax Regime, income tax has become much simpler," Jalan said. "With an exemption limit of Rs 7 lakhs, taxpayers pay zero tax at levels where they were previously taxed." When he presented this budget suggestion on february 1st of next year, he indicated that, as part of a thorough evaluation, making this the only choice would be advantageous overall.
click and follow Indiaherald WhatsApp channel