The Indian government will present its budget on February 1, 2025, and various sectors of society have high expectations from this financial plan. One of the pressing questions is whether the government will provide any relief to income taxpayers. As discussions continue about the old tax regime’s future, taxpayers are eager to understand how changes will impact their savings. In this article, we delve into the government’s potential decisions regarding the old tax regime and how it might affect individuals who have managed to save 1-2 lakh rupees.
Expectations from Budget 2025
With the upcoming budget, salaried individuals are particularly hopeful. Analysts speculate that the government may phase out the old tax regime to stimulate consumption and enhance the country’s economy. While there has been no official announcement yet, significant changes to the tax system are on the horizon. Last year, Finance Minister Nirmala Sitharaman hinted at amending the income tax laws that have been in place since 1962, and a committee has already been formed for this purpose. Reports suggest that a new income tax legislation may be presented in this budget session.
Government’s Focus on the New Tax Regime
The government is putting significant emphasis on making the new tax regime more appealing for citizens. By encouraging more people to adopt this model, the government aims to strengthen the national economy. Increased spending among salaried individuals can lead to a more robust economy, as consumption directly affects economic growth. To facilitate this transition, the government may raise the limit for standard deductions and allow tax-free income up to 10 lakhs.
Implications for the Old Tax Regime
Amid speculation regarding the potential elimination of the old tax regime, tax expert Balwant Jain discussed these developments with TV9 Digital. According to Jain, while the government’s focus is currently on promoting the new tax regime, a complete phase-out of the old tax system seems unlikely in the immediate future. However, there may be future considerations regarding changes to the old system.
The Future of Savings
Under the old tax regime, individuals with an income of up to 2.5 lakhs are not liable for any taxes, and the government offers tax rebates for incomes up to 5 lakhs. This means that under the old tax system, taxpayers can avoid taxes on earnings up to 5 lakhs, especially with deductions for home loans, health insurance, and pension fund contributions. Many people currently have substantial investments in insurance and other savings schemes, raising questions about the impacts if the government does indeed phase out the old tax regime.
What Happens to Saved Amounts?
Even though it is unlikely that the government will suddenly abolish the old tax regime, the burning question remains: what will happen to the savings accrued under this system? Should the old regime be phased out, will taxpayers see any return on their investments? While the immediate concerns about the future of the old tax system remain, there are hopes that the Finance Minister will address these issues in the upcoming budget, reconciling the saying “Old is Gold” with policy decisions.
Conclusion
As we approach Budget 2025, the focus on the new tax regime continues to grow. It is crucial for taxpayers to stay informed about any changes that may impact their savings and investments. Monitoring government actions and understanding the implications of the new tax regime will empower individuals to make informed financial decisions moving forward.