The budget for this financial year is going to be presented by Finance Minister Nirmala Sitharaman on July 23. Generally, various departments have their own expectations when the budget is presented. However, in this year’s budget, the expectations of the middle class people have increased slightly. As such, expectations have been raised whether any changes will be made under the old tax system. This post describes them in detail.
This is the first budget of the third-term Modi 3.0 government. Income tax related announcements are also expected in this budget. However, there is also an expectation that there will be changes in income tax slots in this budget to help the middle class.
No matter what new tax system is introduced, for many people the old system remains the same. So some of them are expecting changes. Bank Bazaar has proposed some changes in this old tax system.
Under the old tax system, income between Rs 2.5 lakh and Rs 5 lakh was taxed at 5%. Income between Rs 5 lakh and Rs 10 lakh is taxed at 20%. And 30% tax is levied on income above Rs 10 lakh. Bank Bazaar expects such changes in tax thresholds to benefit the middle class in general.
No change has been made under the old tax system since 2013. So Bank Bazaar has now proposed to revise the 30 percent tax slab to Rs 18 lakh. It is expected to be much better than the current Rs 10 lakh limit.
Inflation has continued to rise over the past few years. Even in the recent report on bread rice rate in Gris, we could see an increase in inflation. So the tax burden on the people is also increasing as the tax thresholds are not changed under the old tax system.
The Cost Inflation Index has increased from 200 in 2012-2013 to 363 in 2024-25. This is a significant increase of 81.5%. Considering this, it has been said that it is necessary to raise the tax limits.
This results in a situation where the income is reduced and the tax has to be paid. The problem can be fixed by raising the tax thresholds as per the plans put forward by Bank Bazaar. This will also reduce the tax burden on the people.
For example, currently under the old tax system Rs. 10 lakh income earner has to pay an additional tax of Rs 43,226. So Rs 3,602 per month. Similarly Rs. 20 lakh income earner would have to pay Rs 1.84 lakh tax under the old tax system. 67,978 rupees as tax payable under the new tax system.
Many people prefer the old tax system because of the facility of availing various deductions like rent, loan payments, insurance premium, tax saving investments etc. But since 2013, these tax limits have not been adjusted for inflation. Due to this, people have to face higher tax burden and rising cost of living.
Are all these changes proposed by Bank Bazaar acceptable? Will these announcements be made in the budget? We will have to wait till July 23rd to find out.
