The existing tax system, which includes a basic exemption threshold of Rs 3,00,000 in the new tax regime, is being criticised for its outdatedness in light of rising living expenses. 
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The existing tax system, which includes a basic exemption threshold of Rs 3,00,000 in the new tax regime, is being criticised for its outdatedness in light of rising living expenses. Finance Minister Niramala Sitharaman is scheduled to present the Budget 2025 statement in the Lok Sabha on February 1. It is anticipated that the statement will encompass income tax reductions and exemptions for salaried taxpayers. Leading up to the Budget for 2025-26, former BJP MP and financial market observer Jayant Sinha proposed that individuals earning up to Rs 10 lakh annually should receive tax exemptions. He specifically recommended that the "middle class" should be spared from tax obligations.
“Tax benefits should be extended to those with an annual income of up to Rs 10 lakh. My suggestion is to raise the tax exemption limit to Rs 10 lakh, as per our definition of the middle class, which earns up to Rs 10 lakh per annum,” Sinha said, at a pre-budget show titled ‘Jayant Sinha ki Class’, on TV channel Aaj Tak.
The Budget session of Parliament is set to commence on January 31 and is scheduled to adjourn on April 4. The presentation of the budget is scheduled for this Saturday.
Tax cuts and exemptions
The existing tax system, which includes a basic exemption threshold of Rs 3,00,000 in the new tax regime, is being criticized for its outdatedness in light of rising living expenses. It is anticipated by experts that raising this threshold would alleviate the burdens on small taxpayers, decreasing their compliance responsibilities and decreasing the requirement for filing taxes.
Additionally, experts propose the inclusion of further deductions for necessary expenses such as health insurance, life insurance premiums, and interest payments on home loans to enhance the appeal of the new tax system.
The SBI research report ahead of Budget 2025 has recommended various measures to drive tax reforms. One key suggestion is to include all taxpayers under the New Tax Regime to improve compliance and boost consumption by increasing disposable income. The report, titled ‘Prelude to Union Budget 2025-26’, proposes setting a 15% tax rate instead of 20% for individuals earning Rs 10–15 lakh annually. It also advises raising the NPS limit from Rs 50,000 to Rs 1 lakh and increasing the medical insurance exemption to Rs 50,000 from Rs 25,000.
Furthermore, the report recommends applying a uniform 15% tax rate on interest earned from Fixed Deposits across all maturity periods, replacing the current tiered tax system. These suggestions aim to streamline tax policies and enhance overall economic growth.
The proposal suggests harmonizing the taxation of fixed deposit (FD) interest with equities to simplify the existing structure. However, it is anticipated to result in a significant revenue loss of Rs 10,408 crore for the government.
Currently, interest earned from fixed deposits is taxed at individual income slab rates, varying from 5% to 30%.
The State Bank of India (SBI) proposes a flat 15% tax on FD interest, to be charged upon withdrawal and not on an annual accrual basis. This adjustment would align the taxation of FDs with other financial instruments like stocks and mutual funds, which are taxed only upon redemption.
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