‘The hardest thing in the world to understand is the income tax.’ -Albert Einstein
2024 is bidding us goodbyes; the year-end is here and your bank balance is missing a few zeros already. Wait, are you scrolling through your banking app already? It will be your salary day soon, right? Imagine a few more zeros in your account. A new, promising possibility awaits all those taxpayers who are earning approx ₹15 Lakh annually. The news is finally here. Rumours are whispering all around that Budget 2025 may include tax relief. And, of course, like everyone, we, the Corporate Soldiers, are buzzing with happiness and anticipating it becomes true.
The Current Scenario:
Are you already feeling excited by the thought that your salary won’t be gone so soon? But hold on for now! Before we proceed with the new scenario, we should understand the current scenario. With current tax laws, those who are earning ₹15 Lakh annually fall into higher tax slabs. The tax burden is usually described as substantial, but how substantial? To understand this complexity of the tax system, we must understand the old regimes, new regimes, deductions, and exemptions. Even the most financial-savvy people struggle to understand this. It differs! For example, for a person earning ₹15 Lakh annually, the applicable tax rates will vary depending on their chosen regime and the deductions they claim. And that means due to high tax rates (up to 30%), along with surcharges and cess, those earning the mentioned amount face substantially lower take-home pay.
The New Possibilities:
Still not gathering the facts about what reduction could mean to you? The reduction is beneficial in certain ways.
Disposable Income Boost:
If the possible reduction happens, lower tax rates in this income slab would, of course, boost disposable income. Now people with such disposable income can invest, or spend and this will lead to economic growth, and also be beneficial for various industries.
Easing Middle-Class Burden:
The tax slab mentioned represents a large number of middle-class section of our population. This will mean a lot to middle-class families. Reducing taxes here will give them much-needed relief from day-by-day increasing cost of living. In addition, it will boost consumer spending and economic growth.
Promoting Compliance:
Lowering tax rates could also improve tax compliance. There are many cases of tax invasion we have witnessed, but what if lowering taxes could foster a transparency? Since high tax rates discourage many taxpayers, and thus, it often leads to tax invasion. A reasonable tax structure will encourage them to be accountable and transparent.
Attracting Skilled Individuals:
Have you heard those reports of skilled people leaving India and migrating to new lands of possibilities? It was both concerning and alarming. But cheers to this news, competitive tax rates may attract skilled individuals to explore these possibilities within the country. Also, it will boost growth and development.
Budget 2025: What to Expect?
While we all anticipate in good spirits, and of course, it’s too early to say anything, however, let’s see what can be these potential tax cuts.
- There’s a possibility of reduction in new regime rates. A simplified structure of new tax regime could see reductions in tax rates for the mentioned tax slab. (₹15 Lakh annually)
- An option such as Increased standard reduction could effectively reduce taxable income. (For all salary earners possibly)
- Or third could be the possibility of changes in existing income tax brackets, especially under new regime.
Why It Would Matter to You?
What should our average salary man (under the mentioned income slab) should expect from this potential tax cut? Is this question pinching you? First of all, we must gather the fact that it’s not about some extra zeros in your bank account or your pay slip. But it revolves around what this extra money can bring to you. Think about the possibility of repaying your home loan faster or that persisting car loan. You can also invest in your child’s future or education. This reduction can harvest all those long-term plans that you might have postponed due to the cash crunch. Or perhaps you can buy treats for yourself such as a cellular phone you have had your eye on for a long time. Whether you have long-term goals or those small desires to buy something or experience something. This tax reduction can help you relive all those tiny little moments of happiness.
Concluding Our Thoughts:
As we await this positive welcome for the new year 2025, we hope it will uplift everyone in good spirits. This perspective of reduced income tax rates for those who are earning ₹15 Lakh annually is a great welcome for the year. As we enter the new year, we hope that Budget 2025 will bring a significant shift to the country’s economic growth. This move certainly will empower all the taxpayers! What are your thoughts on this potential tax reduction? We are curious to know your thoughts.
