Budget 2025-26 speculation, will annual income up to ₹10 Lakh be tax-free?

As the Union Budget 2025-26 approaches, speculation is rife about significant changes in personal tax structures. Reports from Moneycontrol suggest that the government may consider making annual income up to ₹10 Lakh tax-free and introducing a new 25% tax slab for individuals earning between ₹15 Lakh and ₹20 Lakh. 

These potential measures are aimed at offering relief to taxpayers and enhancing disposable income. 

What taxpayers want 

A pre-budget survey conducted by consulting firm Grant Thornton Bharat highlights strong taxpayers demand for reforms in the personal tax structure. 

• 57% of respondents, advocated for lower tax rates
• 25% of respondents seek higher exemption limits to reduce tax burdens. 

The survey also reveals that 72%of taxpayers have switched to the new tax regime, indicating its growing acceptance. However, 63% still seek enhanced incentives under the old tax regime, underscoring the need for a balanced approach to accommodate diverse preferences. 

Focus on simplification and efficiency 

As digitalization reshapes financial systems, taxpayers are increasingly calling for streamlined processes: 

• 38% seek the option to pay taxes through foreign banks, easing compliance for NRI’s 
• Enhanced operational efficiency in tax refunds to overseas accounts and OTP-based verification for foreign mobile numbers are also high on the wishlist.
• Domestically, 56% of respondents want the income threshold for tax filing increased to reduce compliance burdens for smaller taxpayers. 

Incentives beyond Income tax 

The survey also highlights other key exceptions:

• 53% of taxpayers, call for more flexible withdrawal rules and higher exemptions under the National Pension Scheme (NSP), making it more appealing and beneficial for long-term financial planning. 
• Tax incentives for adopting electric vehicles (EVs) remain a priority, with calls to reintroduce tax deductions for EV loans to boost sustainability and innovation. 

Government's approach 

While the government has indicated that the old tax regime may eventually be phased out, taxpayers continue to value its benefits. Reports of new tax slabs and higher exception limits, if implemented, would make the new tax regime attractive while addressing the demands of a majority seeking relief from the current structure. 

Finance Minister Nirmala Siraraman will present the Union Budget 2025-26 on February 2, breaking the tradition of a February 1 announcement, reportedly due to Assembly Elections in some states. With taxpayers eagerly awaiting announcements, all eyes are on how the government will balance growth, quality, and simplification in this critical fiscal year. 

Stay tuned for live updates on February 2 to see how these speculations shape up in the actual Budget.